Over the week, hard-pressed general retailers once again underperformed the All Share index. The big grocers’ shares, traditionally viewed as defensive, also plummeted.
The latest TNS grocery market share data showed that the hard discounters are continuing to increase their share rapidly and on Wednesday Tesco reacted with the high-profile launch of its own discount range. Tesco remains Bernstein’s top pick. The broker said: “We expect it will deliver robust performance in the UK and it benefits from fast growing, profitable international businesses.”
Pali International dismissed bid gossip swirling around Sainsbury’s and downgraded the grocer from neutral to sell. The broker preferred Morrisons, which it lifted from sell to neutral.
Reduce Woolworths, advised Landsbanki after the variety store group’s first-half losses worsened. New boss Steve Johnson hopes to revive Woolies, but the broker warned: “The challenging consumer environment will mean that recovery will not be overnight. This could be the last roll of the dice for Woolworths in its current form.”
Panmure Gordon, urging sell, said: “The next few months will be squeaky bottom time for Woolworths and it will need to do well to emerge unscathed.”
French Connection’s interims last week carried “glimmers of hope” despite the retailer making a loss, said Dresdner Kleinwort. However, the broker added: “Given gross margin and cost pressures, significant outperformance versus the market will be required to achieve profitability.”
Buy Debenhams, recommended Kaupthing following Tuesday’s update. The broker observed: “Market share gains have been achieved in all major categories and if anything perhaps have strengthened in the fourth quarter relative to the earlier part of the year. Gross margins were held flat, despite some investment in markdown in the last couple of months to clean out stocks.”
Department store group Beales recorded a 6 per cent fall in like-for-likes for the 43 weeks to August 30 – an improvement on the 6.4 per cent it suffered in the first 26 weeks. Gross sales were down 14.8 per cent on the previous year, but the board said initiatives such as a stronger promotional stance would provide the foundations for the retailer’s recovery.
Hold HMV, urged Shore Capital. The broker was impressed by a store visit and last week’s trading update but fretted: “Looking at the longer-term picture, we remain concerned that HMV will ultimately prove to be over-spaced on the high street, relative to the physical demand for books and entertainment.”
No comments yet