Retailers pray for ringing tills
BRITAIN’S high streets will be heaving this weekend as shoppers grab some last-minute Christmas presents on ‘Panic Saturday’ and Sunday, and a number of brokers believe investors’ shopping baskets should also include some retailers.
Investec Securities thinks that fundamentally, ‘ 2015 looks a better year than 2014.’ However, with the uncertainties of a General Election and rising interest rates likely by the year-end, it believes that stock picking will be key.
‘Historically, the general retail sector underperforms in a tightening interest rate cycle, though this doesn’t mean money cannot still be made,’ Investec said in a review looking ahead to the rush of retail trading statements that follow the Christmas period.
Among the winners and losers on the high street, the broker said: ‘ Those exposed to housing/big ticket/electricals, such as Home Retail and Dixons Carphone, are in our view likely to benefit this Christmas, with clothing retailers missing out as a warm autumn hit clothing demand hard, particularly in seasonal ranges.’
But looking ahead to the new year, Investec said it preferred more defensive plays such as Card Factory and WH Smith as well as those with ‘self-help prospects’, such as Home Retail and Marks & Spencer,
Blue chip M&S also got a boost from another broker. Jefferies International raised its target price for the stock in a study of the clothing retail sector which showed that the under-pressure high street icon is improving. M&S shares added 11.2p at 473.7p.
Jefferies was also upbeat on department stores chain Debenhams, upgrading its rating to buy from hold on hopes for better prospects in 2015 after a difficult year, sending shares up 1.6p to 73.95p.
But fellow clothing retailer Next suffered as Jefferies downgraded it to a hold from buy, with the broker saying it believes the firm’s ‘online competitive advantages may be diminishing.’ Shares in Next missed out on the market gains, dropping 65p to 6495p.
There were further gifts for the Footsie as the fabled Santa Rally picked up steam, having been started by upbeat comments this week from the Federal Reserve which buoyed US stocks in their final session of the week.
The FTSE 100 index closed 79.27 points higher at 6545.27, notching up its biggest weekly gain in two years thanks to a strong three session recovery having previously fallen nearly 9pc in a week and a half.
Advertising group WPP Group was a top blue chip gainer, climbing 26p to 1328p as broker Citigroup raised its rating to buy from neutral on valuation grounds after an 8pc fall in the stock since early December.
Insurer Aviva was also buoyed by a change of attitude, with Bernstein Research upping i ts rating to outperform f rom market perform.
The broker branded the insurer ‘a last minute Christmas bargain’ following a 15 pc fall in the stock since the announcement of a deal to buy Friends Life in November. Aviva shares added 14.4p at 495p.
But satellite TV broadcaster Sky was the top FTSE 100 faller, dropping 11p to 889p as broker Westhouse Securities downgraded its rating to neutral from add, noting that ‘nearterm prospects are likely to be shaped by less predictable factors’.
Regulator Ofcom has launched a consultation into whether its rules governing how Sky has to offer its key sports channels to other pay-TV providers are appropriate.
A broker downgrade also did damage on the second line, with oil services firm John
Wood Group shedding 6.5p to 608p after Goldman Sachs cut its rating to neutral from buy in a sector review.
Goldman also did for mid cap satellites firm Inmarsat, downgrading its rating all the way back to sell from buy. Inmarsat shares shed 9.5p at 787p
None of that detracted from fresh strength for the FTSE 250 index, which ended 156.20 points higher at 15,898.91, with online grocer Ocado among the top gainers, rising 15.2p to 381.5p.
Looking at the small caps, Tower Resources jumped 7pc higher – up 0.04p to 0.64p – as the oil explorer struck an agreement with Repsol which reduces outstanding payments for past costs related to a dry well it drilled for the Spanish oil giant off the shore of Namibia.
But LSL Property Services dropped 6pc or 20p to 272p after announcing that its finance director Steve Cooke had left the company with immediate effect.
The group, which has both estate agency and surveying businesses, also warned that it will have to book further provisions of up to £25m for bad claims against it. SHARES in Fitbug, which makes wearable gadgets to track your workouts, leapt 33.9pc as it unveiled three new contracts for its Orb device and Kiqplan app. US online retailer Bestbuy has agreed to sell both from January, while Amazon. co.uk will expand its Fitbug range to include Kiqplan in the New Year. US retailer Target also agreed to promote both products. Shares jumped 2.38p to 9.38p.