Positive notes were issued on Sainsbury’s. Both Pali and ING reiterated a buy recommendation and its shares rose strongly. ING said it had proved “substantially more resilient to downtrading than the market has expected”.
Following Kingfisher’s sale of its Italian Castorama business, Seymour Pierce upgraded the stock and shifted its stance from hold to buy.
“The company should be able to reduce the significant losses from the Chinese business while profits in the UK have, in our view, reached a trough and should recover,” the broker said. Pali was neutral on Kingfisher, viewing it as one of the “nuggets of resilience” in the retail sector.
With the future of Chris Ronnie’s position as JJB Sports chief executive still in doubt and last week’s announcement of an extension of the retailer’s banking facility, Singer’s stance was under review. It added: “If banking facilities continue to be provided on an ongoing basis and a management reshuffle were to take place we could expect the shares to advance from here.”
Singer rated Mothercare a buy. However, the news that Shop Direct was to buy Ladybird, along with the Woolworths brand, prompted the broker to note it was a potential competitor for the maternity retailer. “We expect the shares to lose some of the recent outperformance.”
Stronger than expected January trading at JD Sports, which had reported positive like-for-likes at all three fascias, led Investec to rate it a hold. Seymour Pierce rated it a buy. “We expect further impressive growth as the management continues to turnaround the fashion division,” it said.
The strength of youth-fashion brands was echoed at H&M, which Dresdner Kleinwort rated buy. It noted the retailer’s “management confidence in the ability to withstand pressures on sales and gross margin”.
But it was gloomier elsewhere in the fashion sector. Numis moved its recommendation for Moss Bros to a sell, viewing it as having “no clear turnaround in place”. It did the same for Alexon, with “cost investments and Bay Trading weighing heavily”.
While Findel was among the week’s hardest fallers, Seymour Pierce upgraded it to hold. “The company will, in our view, remain within its covenants through careful management,” it said.
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