Retailers achieved “decent sales growth” in June, the BRC reported, and store stocks rose over the week although they lagged the All-Share index.
Food retailers outperformed generalists. Once again, home shopping group Ocado was in focus as it prepares to float and analysts continued to question its prospects.
Shore Capital’s Clive Black said the proposed valuation of Ocado is “little short of ludicrous” and argued that the retailer is worth about £534m. He cautioned: “We see very limited scope for share price appreciation, even if the company has low-balled very short-term expectations. With no income stream for the foreseeable future the risk-reward equation appears perilous.” Ocado is due to be priced on Wednesday.
Online fashion star Asos posted first-quarter retail sales growth of 54%. Singer, advising sell because it thinks the shares have “run too far” said: “Although the phasing of the Sale has diluted year-on-year growth, underlying growth remains broadly unchanged and margins are up as we expected, by around 100 basis points.”
Confectioner Thorntons is cutting 35 head office jobs and has strengthened its own-store management team as it battles to improve performance. Thorntons reported total company sales down 4.1% to £26.8m in the fourth quarter, when own-store sales slid 6.2%. Execution Noble, advising sell, said: “Head office restructuring should lead to more cost savings over the next year, but questions remain regarding the longer-term strategy on own-stores.”
Trading is improving at Topps Tiles. A like-for-like sales decline of 1.2% over the entire third quarter was better than the 4.3% fall in the earlier part of the period. Buy, advised KBC Peel Hunt. The broker said: “We see no structural reasons why the business cannot recover its peak EBIT margins of more than 20% over time.”
Computer entertainment specialist Game showed off some of the latest product to analysts on Monday, painting an exciting picture of the technology. However, Arden retained a neutral stance on Game and said: “The problem is we have heard this sort of stuff before. The impressive new chief executive Ian Shepherd will have to get the balance right between short-term caution and long-term optimism when he talks to the City for the first time in September, with the interims.”