Sentiment towards general retailers was helped by developments at department store group Debenhams and sports specialist JJB. But Pali International is unconvinced about retailers’ prospects and said: “We remain cautious about the outlook for the general retail sector, particularly after [last week’s] update from Home Retail cast doubt on the ability of the sector to pass on higher Far Eastern sourcing costs to consumer prices.” Pali said it was puzzling that grocers’ “far superior” sales and profit growth relative to general retailers was going unrecognised.
Debenhams impressed with market share gains and said first-half profit before tax would be ahead of last year. Newspaper reports that shareholders and banks had been unable to agree about a rights issue created some uncertainty, but the update was well received by many brokers. Citi said: “An impressive performance that should drive consensus earnings upgrades and continue to support the shares, given the stock’s current discount valuation multiples.”
Numis expected consensus forecast to move from£85m to£95m, but stuck to its hold advice because Debenhams’ price has risen 70 per cent over three months.
Panmure Gordon hailed Debenhams’ trading as “remarkable” but switched stance from hold to sell. The broker said: “If investors could buy Debenhams’ P&L without its balance sheet, then the shares would trade at much higher levels. Unfortunately, this is not possible.”
JJB Sports revealed it had extended its standstill agreement with lenders until Tuesday – a day before rents are due – while attempts continue to sell its fitness clubs division. JJB founder Dave Whelan is favourite to buy the gyms. The retailer also said that, following speculation that a CVA could be on the cards, it is exploring “a number of solvent restructuring options which would be undertaken with the support of lenders”.
Giant jeweller Signet, which does most of its business in the US, successfully renegotiated its borrowings, bringing down the size of its facilities and modifying covenants. The changes will result in a higher interest charge but the news met the market’s approval, making Signet one of the highest risers of the week. Investec rates Signet a buy and said all of the retailers’ objectives from the negotiations had been met.
HMV named Channel 4 boss Andy Duncan a non-executive director. Chairman Robert Swannell said Duncan would be a “real asset”, bringing “a wealth of experience, particularly in media businesses and their online and digital applications”.