As Christmas loomed, store stocks headed south. Food specialists and general merchandisers alike underperformed the All Share index and were sharply down over the year.
Top retailer Tesco’s third-quarter performance was widely viewed as lacklustre. Evolution, advising reduce, warned that “the risk of war is rising” among the big grocers.
Evolution maintained: “There is no scenario where Tesco can stage a dramatic recovery without hurting the sector or its short-term profits. Consequently, neither the sector nor Tesco looks cheap.”
Shore Capital, however, rates Tesco a buy and noted increased volumes as a result of the Big Price Drop. The broker said: “Such volumes should have beneficial implications for gross margins and, or, working capital for the core chain if they are sustained.”
Sell Carpetright said Singer, following interims that reflected punishing trading conditions. The broker said: “There is scope for margin recovery next year, especially as management has been able to do good deals with certain product suppliers against a backdrop of very weak demand. However, if the margin recovery does not materialise we still fear there could be more downgrades.”
Espirito Santo put Supergroup under review after Wednesday’s first-half results. The broker noted the de-rating of SuperGroup’s shares but observed: “Given the track record over the past year, the risks are still high in terms of feeling comfortable with the sustainability of growth and managing the infrastructure underneath it.”
SuperGroup’s house broker Seymour Pierce reiterated its buy advice and £10 price target. The broker said its stance is backed by SuperGroup’s international ambitions, the brand-building importance of the soon-to-open Regent Street flagship and a “more measured” approach to medium-term expansion.
Following troubled outdoors specialist Blacks’ decision to put itself up for sale in a bid to secure its future, “a number” of potential buyers have expressed interest.
Among them is the sector giant Sports Direct, which said if it does make an offer it would likely be in cash. Sports Direct included the usual caveat that there can be no certainty that an offer will be made.
AIM-listed luxury goods group Mulberry impressed with interim profits up more than threefold and strong current trading. Broker Numis said: “Mulberry is an exciting international luxury growth story – around two-thirds of its business is still in the UK and, with the group planning to open another 15 international stores next year, overseas development will continue to drive growth.”
The next big City focus on retail will likely be in January, when trading updates start to come through.