Sunnier economic signs and excitement generated by some potentially massive mergers pushed the FTSE 100 to a new high for the year on Tuesday.
Stores were among the beneficiaries of widespread M&A mania in the wake of proposed tie-ups between T-Mobile and Orange, and Kraft and Cadbury.
Broker Seymour Pierce said US groups were the most likely to move on their UK counterparts, adding that the most obvious link-ups would be Kingfisher with Home Depot or Lowe’s, Game with Gamestop, and DSGi with Best Buy.
Despite all the excitement – including the likelihood of Burberry entering the FTSE 100 – BRC data for August showed a 0.1% decline in retail like-for-likes and analysts sounded a note of caution. The survey was skewed by the timing of the bank holiday, but broker Numis described it as a “reality check”. However, Singer observed: “Anecdotes suggest that the combination of cooler weather with the new autumn ranges is now beginning to drive positive sales trends.”
Analysts assessed Marks & Spencer’s latest collections on a store visit and came away with divergent opinion. Investec observed: “There are signs of improvement in the product itself, but the conflict between brand and category presentation remains a challenge, which leaves the customer having to do more work.”
Credit Suisse noted: “In terms of look and whether M&S has cracked it with this collection we did not feel there was any discernible progress overall, with some things better and some things not.”
Buy Sports Direct, advised Numis, after the retailer reported a 10% rise in group sales to £375m in the 13 weeks to July 26. Group gross profit rose from £150m to £157m and underlying EBITDA this year is expected to be at least £150m. Numis said: “With the back to basics campaign reaping rewards in the UK and an air of stability beginning to build around the reporting and City relationship, we see further upside.”
Sports Direct’s rival JJB was also up strongly. Analysts said the rise might have been on the back of anticipated improved performance by sports groups and World Cup hopes.
Confectioner Thorntons’ preliminary pre-tax profits, including exceptionals, fell by 4.5% to £8.1m and sales rose 3.2% to £214.8m. Chief executive Mike Davies said he was pleased with the turnover growth and that changes made put Thorntons “in a good position to emerge from the recession a more profitable business”.
Laura Ashley’s interim profits were hit by foreign exchange losses and came in at £1.1m compared to £4.7m last time. However sales rose 6.3 per cent and UK like-for-likes advanced 6.7%. The retailer reported a “positive start” to its second half.