Store stocks flew off the shelves as strong sales data and swirling takeover talk prompted demand.
The BRC-KPMG Retail Sales Monitor showed 4.4% like-for-like growth in March, and total revenue growth of 6.6% was the best since April 2006. Citi was downbeat, however, and noted: “With pre-election caution, slowing house prices and declining household available cash through 2010, we fear a return to negative like-for-like territory in the coming months.”
KBC Peel Hunt was more optimistic and observed: “A strong out-turn for Easter against weak comparatives was to be expected, although we gain encouragement that like-for-like sales would be in positive territory if we stripped out the Easter impact.”
Argos owner Home Retail was one of the week’s share price winners following market gossip that Asda was considering a bid (see p12). And the shock news that Asda chief executive Andy Bond is to take a back seat stimulated speculation about what it means for the grocery sector.
Shore Capital said: “We do not foresee this change in management signalling a materially different or, more to the point, price aggressive strategy from Asda: such a stance could be construed as self-defeating, albeit we have to concede that a wounded Asda is cause for some concern on this front.”
Hold Tesco, Jefferies advised ahead of the grocery pack leader’s preliminary results next week.
The broker said Tesco looks fairly rated. While the retailer is expected to make Asian margin gains and reduce US losses in 2010/11, UK retail “looks set to deliver mixed performance” and improvements elsewhere in Europe are reliant on an “uncertain” recovery in like-for-like momentum.
Broker Numis recently met the management of newly floated SuperGroup and was impressed. The broker said: “We came away with the impression that the growth story, while rapid, is more controlled than we had feared.” Numis added: “We see little chance of disappointment in the next six to 12 months; the product is hot, awareness continues to grow and both landlords and franchisee partners are keen to get involved.”
Panmure Gordon resumed coverage of quirky fashion specialist Ted Baker with a buy recommendation and 608p-a-share price target. It said: “The shares are trading on an almost 40% discount to our suggested basket of international peers.”
Sell Game, recommended Execution Noble. The broker said Game needs to address structural issues and maintained: “Unlike HMV, Game does not have the brand stretch across entertainment and, in any case, Game’s stores are too small to be multi-purpose. We cannot see anything but a downsizing as necessary in the medium term to address the migration of sales online.” Game will unveil full-year figures next Wednesday.