UK Retailers Downgraded...

[Riz]

STOCKWATCH UK retailers in focus, Schroder Salomon downgrades sector, stocks

LONDON (AFX) - Shares in the UK retailers, which have seen a massivere-rating over the past nine months, were in the spotlight in a weak earlymorning market as Schroder Salomon Smith Barney turned more cautious on theoutlook for the sector, dealers said. In a note to clients, the broker is understood to have warned that -- aftermeteoric gains on the back of buoyant demand and falling interest rates -- therecent shift in the interest rate outlook could drive a sector sell-off. It said it fears the market will see a return to a "Catch 22" situation,where buoyant trading conditions are viewed as an "adverse pointer" on theinterest rate outlook. As a result, Schroder Salomon has shifted its stance on the sector to'underweight' from 'overweight' and turned more negative on several key players. Next was a notable casualty early on its return to the FTSE 100 index asSchroder Salomon moved the high street fashion giant back to an 'underperform'from the previous 'outperform'. Sentiment was also impacted by the stock goingex-dividend today. The broker made a similar change in stance at Debenhams PLC, while ArcadiaPLC was cut back from a 'buy' to 'underperform' and House of Fraser PLC went to'neutral' from 'outperform'. Schroder Salomon also moved Selfridges PLC andGreat Universal Stores PLC back to a 'neutral' rating. But it remains positive on several key players in the sector, favouringKingfisher PLC, Dixons Group PLC, Signet Group PLC and Matalan PLC -- all ofwhich it rates as 'outperform'. By 9.16 am, Next was down 29 pence at 952 pence, while Arcadia gained 3/4 to270-3/4, Matalan added 3-1/2 at 453-1/2, Kingfisher fell 2 to 383, GUS lost2-1/2 to 595-1/2, Selfridges shed 8 to 373, Dixons fell 3 to 223 and Debenhamslost 1/4 to 415. nm/kgd

 

[darth trader]

thanks for posting this Riz. I'm not really surprised to see it the DEB, DFS and Kingfisher charts all tell the story.

I've instituted stop losses on my holdings but notice that for now MRT, HOF and CC. are all above their support level.

 

[darth trader]

By the way I thought this news article on HOF makes an interesting contrasting opinion...

LONDON (AFX) - Shares in House of Fraser PLC were outperforming the index in
a weak midmorning market, putting on slight gains as analysts -- led by Dresdner
Kleinwort -- moved to upgrade their recommendations following upbeat news from
the Annual General Meeting, dealers said.
Dresdner Kleinwort is believed to have increased its stance to an outright
'buy' from an 'add' with a 150 pence price target, while analysts at Teather &
Greenwood have revised their recommendation up to a 'weak hold' from 'sell'.
Elsewhere, Williams de Broe reiterated its 'buy' stance this morning, while
Credit Lyonnais reiterated their 'add' advice -- having downgraded from a 'buy'
yesterday on valuation grounds.
Earlier at its AGM, House Of Fraser said like-for-like sales in the first 19
weeks of the current year to June 9 were up 8.1 pct year-on-year and total sales
were 16.3 pct ahead.
A block of 6.76 mln shares were later placed off market, priced at 110.2
pence.
At 10.50 am, House of Fraser shares were 3/4 higher at 110, while the
Smaller Cap index was trading down 11.3 at 3115.1.
el/lam

 

[y2k]

Retailers and Builders

The worm will turn on retailers and builders before the year ends. This broker downgrade is sensible and early. Im biding my time. There is potential to make a tidy profit on these sectors when the rot sets in. Neat question is, where will the money flow to next?

 

[darth trader]

y2k, there's still a long time between now and the end of the year!

I think we have reached the bottom of the interest rate falls in the Uk but that doesn't mean that the we will have immediate rises in rates.

Consumer confidence is key to the recovery and it will take a while before the news of a downturn in spending comes to the market - especially when we get into the pre-Christmas run.

I agree with you that the writing is on the wall for house builders and retailers but I'm watching for the next sectors to rise and will rotate accordingly. Short term I think that there is still some upside in selected stocks.

 

[darth trader]

y2k,

a few more thoughts:

SUY - SCS Upholstery has broken out downwards and looks set to fall;

UB52 - FT350 General Retail Index is showing a 5% failure on the ascending triangle that formed since the start of the year;

A portfolio of cap weighted small cap retails shows a retracement that is bouncing of the bollinger bands. ( I'll try uploaading the graph but it's from Sharescope and not internet format);

Re: which sectors are next I would suggest that beverages, food processors and engineering are worth watching.