The worst monthly retail sales drop in 16 years was the industry’s big talking point but store stocks were up in the week concluded by the dire BRC trading data.
Analysts took a mixed view of the BRC figures. None doubted a chill wind is blowing through the high street but some called for a sense of proportion.
Espirito Santo observed: “Overall not a good set of figures but given the comp we do not think they represent the disaster that is implicit in the BRC’s commentary. Clearly the BRC has a job to do in supporting the sector and comments seem designed to make the Bank of England think twice about raising interest rates.”
The climate of anxiety will mean there will be more interest than ever in next week’s prelims from retail top-dog Tesco under new boss Phil Clarke. Panmure Gordon reinitiated coverage with a buy note and sees continued potential.
The broker said: “We think that Tesco’s UK underperformance will be sorted, profitably, and that the group profit and loss will benefit from the gain, not the pain, of recent investment. This should lead to a dramatic increase in international returns and a much higher share price.”
Shore Capital, also advising buy, said Clarke was taking on “a well-operated and well-oiled retailing machine”. The broker maintained: “Like any business we believe that Tesco maybe needs a little more drive and drive is one of the traits that we believe characterises Mr Clarke.”
Marks & Spencer was a winner after last week’s fourth-quarter update. Credit Suisse, which has a neutral stance, observed: “In the UK clothing market of 2011 there is, for obvious reasons, a lot of focus on ability to raise prices to pass through elevated input costs.
“In M&S’s case we believe there is underlying demand for better product that has been evident for some years, which will allow it to execute this trading up, which is quite separate from what other retailers are experiencing.”
UBS downgraded Game to sell because of challenges facing the specialist. UBS said: “The development of new console technology looks limited and we expect any technology will encourage the sale of digital download product rather than existing physical product sales.”