Food and general retailers alike lagged a flattish market as updates and sector data showed sharply divergent performances from store groups.
Electricals group Kesa reported that Comet had slumped into the red in the year to April 30, making a loss of £8.9m compared with a retail profit of £11.5m the year before. Comet will close 17 underperforming stores and has said it is also examining other “strategic alternatives” for the business.
In contrast, AIM-listed luxury goods retailer Mulberry pleased the City with better-than-expected prelims and the new year has started well.
FinnCap, advising buy, said: “The rating appears high. However, the international potential of the brand merits a substantial premium rating.”
The latest Kantar grocery data showed the re-emergence of a “two nations” trend among shoppers as the sector’s polar opposites, Aldi at one end and Waitrose at the other, did well but demand was weak overall.
Broker Jefferies said figures for the four weeks to June 12 showed Morrisons to be the winner among the big four. Jefferies observed: “The rate of outperformance seems to have picked up further despite tough comparables, confirming that Morrisons is currently enjoying superior P&L dynamics to its UK peers.”
Bernstein assessed the potential interest from the big grocers in privately owned Iceland, some of whose investors want to sell their stake, and concluded that Morrisons would be the most keen “given its desire to expand beyond its core footprint, the low level of overlap and Morrisons’ current low level of gearing”. However, Bernstein concluded that Iceland founder Malcolm Walker is the most likely buyer for the business.
Buy JD Sports, advised Seymour Pierce. The broker welcomed JD’s increasing international exposure following the acquisition of a stake in a Spanish business and purchase of a Cecil Gee store from Moss Bros. “Earnings will continue to benefit from the development of the company’s own-label ranges, growth in the internet offer and development of international activities,” said Seymour Pierce.
JD is rated fair value by Singer, which said the Cecil Gee deal, though small, is low risk and should complement JD’s Scotts chain and fashion ambitions. “These stores are on very short leases so provide JD with a low risk entry into the higher level brands within the men’s fashion market.”
Matrix stuck to its 325p price target for Kingfisher, which it rates a buy, following a meeting with the company. Although the shares have been weak since the first quarter update, Matrix said: “We continue to be positive on the stock and view the company as a strong self-help story. The company has achieved excellent earnings growth on flat sales over the past few years and hit some testing targets.”