A round of strong results from retailers as diverse as Next and Kingfisher on ‘super Thursday’ last week helped lift some store stocks, but general retailers overall lagged the All-Share index and food shares were moribund.
Broker Arden observed: “In the short term the general retail sector continues to look more interesting, with a gloomy outlook for post-election consumer spending well priced in, despite the continuing strength in recent trading for many non-food retailers.
“We would still focus on the big overseas earners like Kingfisher, Kesa and DSGi and the deep value stocks like HMV, although fashion looks a good sector to be in and there is more to go for in Next.”
HMV was one of the week’s biggest risers following last week’s strategic update. Investec has a 110p price target and said: “We remain buyers, continuing to believe that structural change is slower than discounted by the market and that HMV’s complementary range and service diversifications will more than offset the pace of underlying erosion of its physical product markets.”
Ambrian, advising hold, said: “Management cannot be blamed for seeking to create a new growth leg to support the travails of its other more structurally challenged businesses. At this stage, while we remain sceptical, we should give HMV the benefit of the doubt.”
Shares in ‘new Carphone Warehouse’ began trading following its demerger from broadband business Talk Talk. UBS initiated coverage with a buy recommendation and a price target of 184p. Next month the retailer will open the first UK Best Buy electricals store, in partnership with the US giant and competing against established leaders DSGi and Comet.
The war of attrition between Blacks Leisure and Sports Direct continued. Sports Direct confirmed it was considering increasing its indicative bid for Blacks and the pair rowed about supplier relationships. Blacks said its proposed fundraising remains in the best interest of shareholders. Rival JJB Sports was up when it said trading had improved in an announcement about the retirement of director Colin Tranter.
Department store business Liberty celebrated full-year EBITDA profitability for the first time in 10 years - £100,000 versus a £3.9m loss the previous year. Pre-tax losses were slashed from £7m to £4.5m.
Chief executive Geoffroy de La Bourdonnaye said: “Liberty has demonstrated its ability to buck economic trends by returning to profitability during one of the worst downturns in recent retail history.” Investors will be updated if an offer is made for Liberty following approaches last month.
Easter means fewer updates next week with the exception of Marks & Spencer, which will issue fourth-quarter figures.