Store shares shifted off the shelf last week as a raft of decent updates - albeit with the usual caveats about prospects - left investors wondering whether retailers had been oversold.
General retailers fared best and outpaced food and drug groups. That is as it should be maintains Oriel, which has been drawing attention to opportunities among general retailers for some time but thinks conditions will only get tougher for the grocers after August’s worrying food sales numbers.
The broker advises selling out of food retail and buying into generalists. Marks & Spencer, WHSmith and Dixons Retail are on its buy list and Game “may be coming towards the end of its downgrade cycle”.
Shore Capital, however, is confident about the outlook for food retail and it has an overweight stance. The broker said: “For the near term the food retailers are benefiting from the return of food inflation that data suggests they are harvesting, which is resulting in increased confidence that sector earnings forecasts will be met.”
Carphone Warehouse founder Charles Dunstone sold 15 million of his shares last week for 236p each. Dunstone still controls just more than 29% of the business, which is opening big-box electricals stores here in partnership with US group Best Buy.
The broker observed: “We suspect that the next M&A moves by Debenhams are likely to be overseas, possibly replicating the sort of deal that was done in Denmark with Magasin du Nord.”
Burberry, prominent again at London Fashion Week, remained on Investec’s buy list following an investor roadshow in the US. The retailer is expected to reap the rewards of infrastructure investment and expansion in new markets.
Investec said: “Management expects that luxury as a sector will outperform general retail and that Burberry should outperform its luxury peers, thanks to the number of growth initiatives it has across both product categories and geographies.”
Department store group Beales generated a rise in group sales, including concessions, of 0.8% in the first 45 weeks of its year. Like-for-likes fell 1.7%. The retailer said it was “most encouraged” by the performance so far of Robbs of Hexham, bought from administrators in June.
Next week Topps Tiles will provide a reading on how the home sector is faring, when it issues a pre-close update.