Encouraging weekly numbers from John Lewis, hopes that Marks & Spencer’s first-quarter update would beat bearish expectations and a profits rise at HMV helped lift general retailers.
Marks & Spencer did manage to come in above the lowest forecasts. Broker Singer said: “These better than feared trading figures should contribute towards a small upgrade to full-year forecasts. Whether or not margin mix advantages in food are offset by promotional dilution in general merchandise remains to be seen.”
But KBC Peel Hunt favours Debenhams over Marks & Spencer. The broker argued that Debenhams offers “clear earnings progression”, market share opportunity and upgrade potential.
Seymour Pierce upgraded entertainment group HMV from sell to hold just ahead of the results, noting that no other retailer’s stock, apart from Findel’s, performed worse in the last quarter. The broker argues that new ventures such as the sale of concert tickets should create momentum. UBS stuck to its neutral view and noted that HMV’s books chain Waterstone’s “remains a struggle, especially with the high street still squeezed by e-commerce and supermarkets”.
The two big electricals groups DSGi and Kesa both posted full-year numbers. Investec rates DSGi a buy and Kesa a hold. The broker said: “We believe that DSGi will move over time towards its target of 3 to 4 per cent group operating margin and that there is substantial potential for shareholder value enhancement even below this level.”
But Investec said of Kesa: “While the shape of recovery is not dissimilar to that of DSGi and valuation metrics are also low, we have concerns on French consumer demand, which is critical for the overall financial well-being of the group.”
Buy Carpetright, recommended KBC Peel Hunt, despite a fall in full-year profits. The broker said: “While we do not look for a notable pick up in like-for-like sales volumes, it is the opportunity for market share opportunities from competitor store closures, insurance business and the new-build housing market that may offer sales performance beyond our forecast assumptions.”
It was Groundhog Day for Clinton Cards as it bought 196 Birthdays stores out of administration. Clinton owned Birthdays prior to its collapse and insisted, despite its earlier dire experience, that the deal “is expected to be accretive to earnings per share”. Numis, advising buy, increased its Clinton price target to 35p and upped its 2010 profit forecast by £3m to £7.5m.
Citi upgraded JJB Sports from hold to buy last week. Citi maintained: “We argue that despite debt facility constraints, execution risks and competitive pressure, the share price upside for success outweighs the high risk.”
Next week the focus will once again be on Marks & Spencer, as the retailer holds a potentially stormy AGM.