More retail gloom, with Seymour Pierce this morning predicting a dire Christmas and a profit warning from Marks & Spencer - down 3.25p to 217.5p - in January.
Seymour Pierce analyst Freddie George has come up with this piece of seasonal non-cheer for the beleaguered high street:
"Having spoken to most of the retailers, which will be issuing Christmas trading statements in our universe over the next month, (22 companies in all), its official – this will be the worst Christmas for many years.
"Almost all the retailers reporting will disappoint based on our figures. Sales will typically be down by 6% to 9% on a like for like basis over the Christmas period in apparel, 10% to 13% in electricals and over 10% in home related products. Gross margins will have also weakened from the third quarter.
"The weak sales trend and the intense discount activity will continue well beyond January 2009, and will lead to a further step down in 2009/10 profit forecasts. The retailers will also be impacted by a stronger dollar as well as pension and supplier credit concerns. More worrying, looking ahead, as in previous cycles, it will take time, in our view, for the retailers to rebuild profitability from these lower levels.
"We continue to maintain that it is too early to buy the sector. January 2009 is likely to be a re-run of January 2008 with the year beginning with a profits warning from M&S, followed by a decline in the sector and a late recovery towards the end of the month. 2009 will, in our view, be much more of a trading market with some measure of confidence returning during the year."
He has sell ratings on M&S (profits will disappoint, the 2008/9 dividend will be cut and debt covenants will become an issue) as well as Debenhams, up 0.25p to 24.75p, and Topps Tiles, steady at 23p, because they are both highly leveraged.
Retailers linked to home-related spending will also suffer, he believes, and so has sell recommendations on Home Retail Group, which has recovered 5.5p to 209.5p after yesterday's falls, and Carpetright, up 0.25p to 87p.
On a brighter note he said companies which might just about meet expectations over Christmas included Asos, down 4p at 237p, Mothercare, unchanged at 330.75p, WH Smith, up 2.75p at 346p, and Game Group, steady at 115.75p.
