Retailers stir FTSE 100 onto impressive gains

Grocer Morrisons led the charge, shooting up 8 per cent on the day it issued a surprise trading update revealing that full-year profits would beat expectations.

Accumulate, advised Charles Stanley. The broker said: “We consider the valuation undemanding, given industry-leading sales momentum and superior forecast earnings growth.” Pali International stuck to its neutral stance and increased its price target from 270p to 300p.

The good news also helped rivals Sainsbury’s and Tesco’s share prices as latest TNS data showed that the big four grocers are taking share from the Co-operative Group/Somerfield combine.

Broker Bernstein retained Tesco as its top pick, despite labelling the market leader’s TNS performance “disappointing”. Bernstein maintained: “We expect Tesco’s performance to step up in September as it anniversaries the introduction of its discount brand range.”

Next also pleasantly surprised when it brought forward its trading update, revealing an unexpectedly strong performance and internal profit targets raised by £30m. However, Next’s shares fell as a result of the cautious outlook statement.

The uncertain prospects led ING to retain its sell advice, although the broker increased its price target by 90p to £13.60. Citi retained its buy stance and said: “We believe further earnings momentum will follow in the second half given our view that UK consumer demand patterns will improve through 2009.”

There was a fillip for embattled JJB Sports, which holds its AGM today. It emerged that billionaire Microsoft tycoon Bill Gates’ philanthropic trust has taken a stake, providing some welcome support in the wake of the loan controversy that has engulfed the retailer.

Kingfisher was up after the DIY giant took analysts to see its Russian operations and on hopes of good news in its second-quarter update, scheduled after Retail Week went to press. Investec said Russia “could be a significant opportunity in the fullness of time”.

Seymour Pierce upgraded entertainment group HMV from hold to buy. The broker said HMV had been overlooked in the recent retail rally but its eponymous chain and stablemate bookseller Waterstone’s “are the only credible specialists in their categories”. Seymour Pierce estimates HMV will pick up an extra £50m sales as a result of the demise of Zavvi.

Variety store group Instore reported that margins are likely to remain under pressure “over the coming months”. The retailer warned: “It will be some time before the effectiveness of the actions taken to address fundamental issues within the business can be judged with reasonable certainty.”