General retailers staged a “stupendous run” last week, broker Numis observed, buoyed by better than expected Marks & Spencer numbers.
Numis still sees plenty to be worried about but admitted: “There seems little for bears to grab onto right now – something we expect to persist, in the absence of another HBOS-type event, for the next six months and we see little value in ‘standing in front of the train’.”
There was renewed talk that electricals group DSGi was considering a rights issue so it can accelerate its transformation programme. In response to the speculation, the retailer said: “DSGi regularly reviews its capital structure relative to its medium-term operational and strategic plans. No final decision on any course of action has been taken.”
KBC Peel Hunt retained its sell advice on Marks & Spencer. The broker said “full margin recovery remains in doubt” and concluded: “While sales may have reached the nadir, the catalysts for recovery after stability have yet to be confirmed. Of the large-cap retailers, we continue to prefer Next.”
Nomura was also confident about the outlook for Next following a meeting with the management.
The broker reckons Next can beat its conservative guidance and said: “Tight management of the group’s operating metrics gives scope for upside earnings surprise in the event that market conditions improve. We also believe that there are medium-term growth opportunities, as evidenced by the group’s initiative on standalone home stores and teen fashion through the Lipsy brand.”
Panmure Gordon moved Home Retail Group from buy to hold because its target price had been surpassed and DIY chain Homebase is “a year behind B&Q in terms of adapting to the new consumer economics”. The broker raised its target price for B&Q owner Kingfisher from 160p to 180p and said that there was increased confidence that losses in China could be eliminated.
Last week’s placing of Baugur’s stake in department store group Debenhams “removed a significant stock overhang” and went “a long way to providing the company with a more orderly shareholder register”, observed Citi. The broker changed its recommendation from hold to buy and said the changes, along with better recent trading and the potential for an improved capital structure, should drive up the retailer’s valuation.
JJB updated on plans for a CVA and refinancing. CVA meetings for creditors will take place on April 27, followed by those for shareholders two days later.