While retailers rose over the week, Mothercare’s shares went in the opposite direction as desperate trading in the UK claimed the scalp of chief executive Ben Gordon on Tuesday.
Mothercare’s shares rose that day as speculation swirled that its difficulties might prompt a bid, but broker Arden, which rates the retailer a reduce, struck a cautious note.
Arden said: “We would be wary of wishful thinking about Mothercare and sense the market is overestimating the value of the overseas business and underestimating the cost of shrinking the UK business.”
Burberry, which was harshly marked down by the market a few weeks back on fears of a Chinese slowdown, climbed sharply ahead of a reassuring first-half update showing continued comparable sales growth of 30% in shops in China. Investec, a buyer, said: “Burberry’s statement is a beat to both our and consensus expectations.”
Hold N Brown advised Seymour Pierce following interims that showed the home shopping group under increasing pressure. The broker said N Brown “has an attractive niche position in the growing outsize market” but is fairly valued given “pedestrian growth expected for the next couple of years”.
Singer rates N Brown a buy and argued: “N Brown looks well set for future growth given the niche nature of the business, positive demographic trends and the increasing sales shift online.”
Shore Capital initiated coverage of clothing retailers with a recommendation that investors “focus on those companies that are looking to update their business models in a significant manner”.
The broker rates Marks & Spencer and Ted Baker buys, Next hold and Debenhams and Supergroup sells.
Buy Ted Baker advised Oriel after first-half results it described as a ray of sunshine in the gloomy retail environment.
The broker said: “Ted Baker remains a stock with prospects to grow both internationally and at home. We expect the company will continue to consistently grow earnings.”
Morrisons emerged the winner from the latest Kantar grocery industry data said Jefferies, which rates the grocer a buy and maintained: “As more new space comes on stream and the own-label product relaunch builds momentum, we expect this strong performance to continue.”
Shore Capital, which rates Morrisons a hold, was impressed by Morrisons’ new M Kitchen range and noted: “We believe that it does represent a material step up for Morrison in the prepared food arena, where it has lacked presence and authority, to our minds, especially versus Sainsbury’s and Tesco.”
Next week brings Debenhams’ finals and Argos owner Home Retail’s interims.
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