Food giant Sainsbury’s was among a raft of big names to report over the week, when general retailers held their own against the market.
Sainsbury’s posted like-for-like growth of 1% in its fourth quarter. Chief executive Justin King said that Sainsbury’s had outperformed the market and drawn a record 21 million customers per week over the 10-week period to March 19.
However, Seymour Pierce advised investors to sell Sainsbury’s. The broker said performance in the quarter had not met expectations and argued its “premium valuation” was unjustified.
Seymour Pierce said: “In view that sales are under pressure, with volumes in the sector - excluding inflation and VAT - down by about 4% to 5% over the period and promotional activity at an all-time high, forecasts for 2011/12 are likely to come under pressure.”
Shares in French Connection, which have soared in recent months, fell as investors took profits. Last week the fashion group posted a big turnaround in full-year profitability, beating City expectations.
FinnCap rates French Connection a hold and is cautious about prospects. The broker said: “Although French Connection is a stronger business than a couple of years ago and management faces fewer distractions, we fear that a deteriorating UK retail outlook will curtail profits growth this year.”
Oriel switched its stance to hold from buy and noted: “We feel the valuation may be a little stretched given the specific headwinds and the poor UK consumer outlook.”
Entertainment group HMV was one of the week’s biggest risers following a bullish presentation by chief executive Simon Fox at last week’s Retail Week Conference. He said then that he expected HMV still to have hundreds of stores in five years’ time and that discussions with its banks were progressing well.
Last week Howes bought 3,500 shares at 1435p each, taking his stake in SuperGroup to 0.95%. Broker Arden rates the retailer a buy and said: “We are pleased that the shares have begun to rally.”
Broker Singer stuck to its sell stance on Carpetright after a meeting with management. Singer said: “We believe that conditions remain tough, but trading may not have deteriorated further as it has done elsewhere in the sector.”