Food retailers and general merchandisers alike fell last week but still outperformed the market. The industry’s prospects continue to polarise City opinion, however.

For the bulls, Singer Capital Markets shifted its sector stance to overweight from underweight, despite cutting 2010 full-year forecasts again by an average of 6 per cent.

The broker said: “For the first time since late 2007 these downgrades do not drop us below consensus. We view this as a significant development.”

But in the bear corner, Pali International warned that despite better than expected retail sales figures last month, “January was the blip and February will be the trend, which is why the hopeful rally in the general retailers will soon peter out”.

Sports Direct reported sales up 12 per cent to£355m, generating flat gross profit of£143m, over the 13 weeks to January 25. UK sales were ahead of expectations but weak sterling hit gross margin. Sell, advised Investec. The broker noted: “We remain very cautious on the profit and cash flow outlook.”

Sports Direct’s rival JJB Sports negotiated an extension of its standstill agreement with lenders until March 16, subject to progress on the proposed sale of the retailer’s fitness clubs division.

Topps Tiles became the latest retailer to suffer withdrawal of supplier credit insurance, but reassured investors there would be no material impact. KBC Peel Hunt maintained its hold recommendation and said: “Topps has sufficient reserves to fund its own working capital if necessary.”

Sell HMV, said Seymour Pierce, following a company visit. The broker reasoned that good news, such as gains from the collapse of rival Zavvi, are already reflected in the share price and said: “The stock has risen more than 30 per cent since the weaker than expected interim results and is now rated at a significant premium to peers Game and WHSmith.”

WHSmith directors offloaded optioned shares last week. Pali was unconcerned and explained: “The directors are selling only enough shares to pay the income tax that they have become liable to on the vesting on the final tranche of the shares.”

AIM-listed Stylo was formally put into administration after attempts to restructure the shoe group through corporate voluntary arrangements were torpedoed by landlords. Talks are ongoing about the future of the business.

Flying Brands boss Tricia Killen is leaving less than a year after being parachuted into the troubled retailer. Her departure follows a broadside against the company’s management by leading shareholder Sir Tom Hunter.