Sainsbury’s takes tumble while general retailers come out top

Delta Two withdrew as a result of the credit crunch and funding of the grocer’s pension scheme. Charles Stanley, advising hold, said that whatever Delta Two decides to do with its 25 per cent stake would be critical. Bernstein reduced its Sainsbury’s price target to 500p, but reiterated its market perform recommendation.

Tycoon Robert Tchenguiz, whose R20 investment vehicle controls a 10 per cent stake in Sainsbury’s, calmed speculation that he would sell up, saying Sainsbury’s had significantly more value than its present valuation.

Forecast-beating interims from Marks & Spencer helped confidence. Investors were pleased by a big dividend rise and share buyback plans. Deutsche Bank judged M&S to be “on track, despite adverse weather and store disruption” and said it was its top retail stock pick. However, Panmure Gordon was cautious. The broker said M&S is at a crossroads: “Bluntly, either you think history will repeat itself and M&S will flounder on yet another£1 billion investment programme, or it won’t and the new team will lead the company into an extended period of double-digit sales growth.”

Kingfisher was a faller, after it announced the surprise departure of chief executive Gerry Murphy. Landsbanki thought Murphy’s departure would go down well with investors and said: “A new chief executive is likely to launch a full review of the business and is likely to review the thinly covered dividend.”

Electricals group DSGi was dubbed Disappointing Stores Group by Pali International. The broker expected the retailer to be ejected from the FTSE 100 next month, but argued: “We think this is the wrong time to throw in the towel. We think DSGi still has good recovery and/or break-up potential in the long term and the dividend yield is supportive.”

Fashion group Alexon disclosed that there had been no improvement in the 5 per cent like-for-like decline in the period since its last update. The retailer revealed details of its£17 million return of cash to shareholders. Numis expected to shift its recommendation from buy to hold once the market had digested the news.

Buy home shopping group Findel, urged Kaupthing ahead of finals this month. The broker said: “Despite the mail dispute and a drag from debt costs, Findel remains poised to deliver well above average growth and improve earnings quality.”