The week in retail was dominated by the surprise announcement of Sir Terry Leahy’s plans to retire as chief executive of Tesco next March. Tesco shares fell more than 2% on Tuesday as the City digested the news, but analysts were happy with the appointment of Tesco veteran Phil Clarke as his replacement.
“Sir Terry will be a big loss, but there is a significant pool of talent taking over and we think that the new structure is more appropriate to the changing shape of the company’s business,” said Ambrian analyst Philip Dorgan, retaining a buy recommendation.
Tesco wasn’t the only faller over the week, with both food retailers and the general sector falling over the week. General retailers were down nearly 5% amid growing concerns about a rise in VAT in the emergency budget in two weeks time, and May’s BRC sales survey, which showed only a modest rise in like-for-likes and another poor performance from the big ticket end of the market.
Laura Ashley reported strong trading, however, with UK like for likes up 5.3% in the first 17 weeks of its financial year. Online sales were up 74%, and a new South Korean franchise partner was announced as part of plans to further grow the international franchise and license network.
JD Sports published a positive update, with improved trading at both its sports and fashion fascias over the past eight weeks. Overall like-for-like sales were up 4.1%, with sports up 5.1% and fashion down 1.2%. Buy, said Singer, adding “the current valuation remains extremely compelling and the prospect of further earnings enhancing acquisitions cannot be ruled out in light of the balance sheet strength”.
Findel was the week’s biggest faller, losing 14% of its value after offloading the Webb Group, which comprises home entertainment businesses Choices UK and Webb Ivory Burton, for £1. Findel will be hit by a £45m write-off related to Webb in its next set of accounts.
Sainsbury’s chief executive Justin King trousered £8m in pay and benefits last year, the retailer’s annual report revealed. His company reports on first-quarter trading next week, and Jeffries - recommending hold - expects underlying like-for-likes (excluding fuel and VAT) to be flat. “We expect Sainsbury’s conference call to confirm that industry growth remains restrained by a lack of inflation and mix support,” the broker said.
Ocado announced that its customers will have the chance to buy shares in the company if it goes ahead with its anticipated float. The offer will apply to shoppers who have spent £300 with Ocado this year. However, Ocado chief executive Tim Steiner said the retailer had still not decided whether to proceed with the float.