The sector entered its golden quarter on a high as, at last, the retail sector shot up. Ironically, bullish comments from Tesco boss Sir Terry Leahy – typically more likely to drive other retailers’ share prices down – prompted a shift in sentiment.
Kaupthing analyst Matthew McEachran said: “There seems to be a real sense now that share prices are over-compensating for the choppy waters ahead and comments from Tesco about the UK consumer and pricing outlook helped to improve confidence.”
Bernstein rated the grocer outperform and said that the interims “reassured that Tesco is in control of its operating margin in the UK and that growth avenues remain strong”.
Fashion group Next’s price rose as directors followed up recent results with an investor roadshow. Despite selling by Morrisons’ chairman Sir Ken, the supermarket chain was also a riser, but variety store group Woolworths fell, following talk that Baugur was selling down its stake.
Debenhams is oversold, argued Pali International. The broker, which believes Debenhams’ fair value is 100p, expected profits to start recovering in the new year and thought short-term trading has improved.
Buy Moss Bros, advised Numis, after the menswear retailer’s interims met expectations. The retailer made a first-half loss of£800,000 and like-for-like growth fell from 3 per cent in the period to 0.8 per cent in the first eight weeks of the second half. However, Numis said that Moss Bros’s valuation was undemanding.
A pre-close update from Jessops, the troubled camera specialist, was greeted with relief that its restructuring was going to plan. The retailer expects to have lost£7.5 million last year and like-for-likes plunged 8.7 per cent over 51 weeks. However, costs have been cut more than anticipated. Seymour Pierce, which advised hold, said: “The investment remains very speculative and carries a degree of risk, but, at these levels, it probably isn’t worth selling.”
Monsoon founder and chairman Peter Simon unveiled a 424p-a-share proposal to take the AIM-listed fashion group private, valuing it at£755 million. Investor Polygon, which opposed an earlier attempt, said that it would support a deal this time. Simon and his family own more than 75 per cent of the shares already.
WHSmith will post its preliminary results next Thursday and Deutsche Bank rated the retailer a hold. The broker said: “We view WHSmith as a relatively defensive general retailer, particularly due to its cost-saving opportunities, but look for greater evidence of growth in the core business and further clarity on balance-sheet intentions.”
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