General retailers were hit in the wake of poor January sales data from the British Retail Consortium and wider market turbulence at the end of last week.
Sector like-for-like sales fell 0.7% last month, the BRC reported, and total sales growth was 1.2%- the worst January showing in 15 years.
The underlying trading message was difficult to decipher because of factors such as heavy snow and the VAT rise, which dragged some sales forward into December.
Brokers were cautious about the retail outlook. Citi said: “We forecast a fade in household cash flow across 2010, driving our flat UK general retail like-for-like forecast, and retain an underweightsector stance.”
Numis noted: “Wary of the uncertain consumer outlook and cautious sentiment we continue to advocate buying back the retailers on a selective basis favouring Halfords, Next and Debenhams.” Broker Investec said the March sales figures would provide a clearer guide of industry performance.
UBS reiterated its buy advice on Kingfisher, which updates on its fourth quarter next week. The broker expects snow will have had an impact on B&Q but believes that the earnings recovery story at Kingfisher still has legs.
Oriel switched its stance on Carpetright from hold to reduce after last week’s update. Carpetright has “bucked the derating trend suffered by the retail sector”, said Oriel, but there is “no room for further disappointment in the rating”.
Halfords was in the news after reports that the motor accessories group is on the hunt for acquisitions and interested in arts and crafts specialist HobbyCraft, the private retailer up for sale for £70m.
Shore Capital, which rates Halfords a buy, was sceptical and said: “We feel this is an unlikely combination with limited synergies and does not appear to be in line with management’s strategy of being interested in bolt-on acquisitions in the after-sales car and leisure markets.”
New Look is proceeding with an IPO and is expected to publish its prospectus on Monday. News on the potential flotation of fashion retailer Supergroup is also expected soon, and speculation is mounting that food etailer Ocado will also attempt to float.
However, a top private equity boss warned that the number of IPOs generally that go ahead will be limited.
Speaking at private equity firms’ annual industry beano in Germany earlier this week, Advent International chairman John Singer said there was only a “tiny window” of opportunity to float and warned: “We are likely to see some stickiness in exits and some selectivity from investors.”
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