By Steve Goldstein
The air continued to come out of Marks & Spencer shares on
Wednesday as the clothing and food retailer reported
weaker-than-expected sales.
Marks & Spencer shares slid 6% after the U.K. clothing
retailer said comparable U.K. sales for the 13 weeks to Dec. 26
rose 0.8% from a year earlier, missing consensus expectations for a
1.2% advance.
The company said that after adjusting for the timing of its
Christmas sale this fiscal year, which started on Dec. 27,
comparable sales were up nearly 2%. M&S, like Next on Tuesday,
was cautious going forward.
Analysts weren't scathing toward the company but found better
alternatives.
"While a return to positive [comparable] sales growth is
encouraging and comparing numbers with others is complicated by
timing issues and definitional differences, it appears as if
M&S has had a respectable Christmas and not as spectacular as
others," said Kate Calvert, an analyst at Shore Capital. "We
continue to believe that there are structural and operational
issues which may hold back a recovery and result in continued
industry underperformance while management addresses them."
Seymour Pierce analyst Kate Heseltine cut her rating on M&S
to hold from buy, citing the 10% gain in M&S stock since late
October.
Also in retail, J Sainsbury dropped 1.3% ahead of the
supermarket's update on Thursday, while Tesco slipped 1.7% as
Jefferies International downgraded it to hold from buy Wednesday,
citing valuation and saying that a more aggressive price target is
prevented by the continued U.K. sales lag and the reduced
likelihood of future U.K. margin gains.
More broadly, the U.K. FTSE 100 slipped 0.1% to 5,519.83,
putting the index on track to end a three-session winning run.
The British pound (CUR_GBPUSD) changed hands at $1.5947, down
0.2%.
Elsewhere in London, Petrofac lost 2.8% as Morgan Stanley cut
the oil services firm to underweight from equal-weight, saying the
firm will struggle to surprise positively and valuation is
demanding.
The Royal Bank of Scotland (RBS) rose 2.7% to extend its 2010
rise to over 24%.
Exane BNP Paribas, which upgraded the bank on the first day of
the year, said the Edinburgh lender should act now to buy back or
convert 14.1 billion pounds of preference shares and Tier 1
securities where it's not paying coupons for two years due to
European Commission rules.
U.K. infrastructure software group Autonomy gained 4% as it said
it's expecting 2009 results in line with consensus estimates as it
expects to report adjusted earnings per share of 97 cents on
revenue of $740 million.
Outside the FTSE 100, Games Workshop jumped 30.3% as the maker
of The Lord of the Rings strategy battle game said pretax profit in
the year to May 30 will be 5 million pounds ahead of market
expectations, citing "satisfactory" sales in December, improving
gross margins and cost control.
Biotech group Henderson Morley lost 13.8%. It said negotiations
for a potential purchase of its ICVT human technologies have been
extended for another 60 days though it believes "we remain on
course to achieve the divestment within this period." In the first
half to Oct. 31, the company's available cash fell to 94,717 pounds
from 203,786 pounds.