General stores and food retailers both had a dull week, with each sector lagging the market.
Outdoors specialist Blacks Leisure was among the biggest fallers as its restructuring plans were thrown into turmoil following the intervention of rival Sports Direct. Blacks had scheduled a shareholder meeting last Wednesday to seek approval for a fundraising, but postponed it when Sports Direct - which owns a 28.5% stake in Blacks - said it would oppose the plans.
Seymour Pierce rates Blacks outperform and said: “One potential motive for the share acquisition may be as a precursor to Sports Direct bidding for Blacks Leisure. Mike Ashley/Sports Direct was rumoured to have made an approach to acquire the business last February.” The broker rates Sports Direct a buy.
Another troubled sports retailer, JJB, is also a buy according to house broker Panmure Gordon, which issued a bulky note. JJB will soon be fully stocked again and Panmure said the retailer is “now well positioned for a sustained recovery” following fundraising last autumn and improvement measures taken by new management.
Department store tiddler Beales was at the centre of bid excitement and was the week’s biggest riser. Long-standing investor Lawdene - connected to private department store business Hoopers - cut its stake from 24.4% to 4.5%, enabling property entrepreneur Andrew Perloff’s Panther Securities to build up a 29.72% stake. Beales bosses said they would meet Perloff “in the near future”.
Buy WHSmith, advised Oriel. The broker said that concerns about the growing e-reader market’s impact on the bookseller and stationer are overdone, and suspects restructuring will add excitement to the shares. Oriel said: “We continue to believe that the high street and travel businesses will split at some stage in the next 12 to 18 months and that the sum of the parts is a valid way to value the shares. Either business would tick a number of private equity boxes.”
Tesco international supremo Phil Clarke took brokers on a tour of Polish operations last week. Nomura, advising buy, said: “Tesco has significant opportunities for growth through the development of further central buying practices, own-label penetration and, most importantly, the smaller stores within its multi-format business.”
Buy Debenhams recommended KBC Peel Hunt after a company update. The broker said: “With a successful exit from autumn/winter and early momentum from new season stock, there appears to be stability in top-line performance and upside potential to margin guidance.”
Burberry’s restructuring of its underperforming Spanish business met with approval from Shore Capital, which rates the stock a buy. It said: “Management has dealt with [Spain’s] decline well. Strategically and financially this is the right decision, even though there may well be some short-term financial pain.”