Retailers may have gone down like dominoes over the week but despite the slew of bad news publicly quoted general retailers were up versus the market generally.
Embattled entertainment group HMV was the biggest winner following formal completion of the sale of books chain Waterstone’s and the offloading of HMV Canada to restructuring firm Hilco for £2m.
Following the Canadian deal and ahead of HMV’s results, expected after Retail Week went to press, Seymour Pierce stuck to its sell advice. “We continue to believe the business is a value trap and the Waterstone’s deal is expected to be dilutive to earnings.”
The week’s share price loser was Ocado, despite reporting its first pre-tax profit and striking a distribution deal with Carrefour. Ocado is struggling to cope with shopper demand and broker Oriel was unimpressed by falling productivity and order accuracy and retained its sell stance.
Oriel observed: “Negative forecast momentum is not something you’d usually associate with sky-high valuations and despite the fact that the shares have been poor performers of late, the multiple remains eye-watering.”
JP Morgan Cazenove, which has a neutral stance, remained convinced by Ocado’s long-term investment case but admitted the shares are likely to be held back until the opening of a second distribution centre next year.
Tesco was down, despite a flurry of buy notes following an analysts’ trip to central Europe. Nomura said: “The three-day field trip provided a timely reminder of Tesco’s growth engines and the opportunities that remain to leverage the capital deployed overseas.”
Shore Capital maintained: “We do not believe that the current valuation multiples for Tesco’s stock are reflective of the resilient performance or potential of the company - a business for which the asset base and operating platform are second to none.”
The potential sale of electricals group Comet by parent Kesa inched forward as about 10 interested parties signed non-disclosure agreements.
Home Retail was down in the week it acquired the famous Habitat brand. Arden analyst Nick Bubb, a seller, said: “Will this make a blind bit of difference to Argos’s calamitous like-for-like sales decline given the pressure on big-ticket consumer spending? No.”
Singer downgraded Game, cutting its target price from 49p to 27p. The broker said: “We remain cautious on earnings prospects given competitive pricing pressures from the grocers and mass merchants along with the medium-term threat from digital distribution.”
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