Retailers are in focus with Marks & Spencer slipping on talk of a share sale, but Next boosted by an upgrade.
Marks is down 1.8p at 351.5p after suggestions that Sir Stuart Rose, the retailer's former chairman, could have sold some of his 1.4m shares. He was restricted from reducing his stake in Marks until the start of this month, but as he has started to take on a number of different roles, traders believe he might also be diversifying his shareholdings.
But Next has added 32p to £20.56 as Morgan Stanley said the worst could be almost over for the UK retail sector. Analyst Geoff Ruddell said:
We stay overweight on Next (price target increased from 2,470p to 2,800p ) as its strongly positive risk-reward skew is supported by disciplined management and core cash flow power. Since Next began buying back its share capital in 2000 it has retired more than 190m shares (versus a current share count of 177m). No other company in the FTSE 100 has come close to using its operating cash flow in such disciplined fashion.
Our forecasts suggest that Next will generate more than £1.2bn of excess free cash flow over the next five years. We expect to use it all to buy back shares. We believe that the UK retail sector is very close to bottoming. Last time
it did so (in late 2008) Next shares rose 40% in six months. We think history could repeat itself.
