Mike Ashley's Sports Direct International has jumped 4.75p to 40.5p after reporting a better than expected 7.4% jump in first half profits.
The company said it was "a solid set of results in what was a very tough trading period." It said its "back to basics" strategy - strict cost control, prudent stock levels and increasing efficiency across the group - was working well, and its banking facilities were agreed until 2011.
This contrasts with rival JJB, which last week said sales were continuing to fall and it would only meet profit forecasts if it traded well in January. Sports Direct has bought a 5% stake in its rival and has contracts for difference on another 17%. It announced a £27m writedown on its investments - unsurprising given recent share price falls - which also include Amer Sports, JD Sports and Blacks Leisure.
Analysts had mixed reactions. Philip Dorgan of Panmure Gordon said in a hold note:
"We are pushing through a small upgrade, from£43m to £47m pretax, but we are cutting our dividend forecast from 4.5p to 3.7p. At these levels, the shares trade at 6 times earnings and give a yield of 10.5%. This looks cheap, but we are some way away from a restoration of credibility, even if these results represent a small step along the way. "
But Investec's Katharine Wynne was more negative:
"Underlying interims are broadly flat, which is a better result than we had expected given the market environment. However, despite big capital expenditure reductions which look unsustainable, the cash position continues to deteriorate and the interim dividend has been cut from 2.1p to 1.2p. We expect the second half will be rocky for the sports retail industry and remain sellers."
Still with retail, Marks & Spencer has slipped 1.5p to 226p after a sell note from analyst Nick Bubb at Pali International, who believes the company's trading is poor at the moment. He suggested Marks - despite its previous comments - may need another one day 20% off sale. He said:
"Industry sources indicate that Marks had an appalling week last week, with sales as much as 20-25% down on last year in some stores, with consumers clearly unimpressed by the modest promotions they had to offer last week and waiting for them to go on full sale again.
"However successful the two "20% Off Everything" One-Day Sales were on November 20 and December 4, it looks as if they simply pulled business forward and undermined consumer trust in the brand. With Debenhams upping the promotional ante again this week, with more "Up to 50% off" discounts, Marks' hand may be forced and they may have to have another One-Day Sale again pre-Xmas, which would destroy what's left of their pricing power.
"Marks has many problems, with market share under pressure in both food and clothing, in a fast-declining retailing market and we still think the fast-depreciating freehold properties will be worth no more than the expected net debt of £3.1bn at year-end. Marks should survive the downturn, but investors have to appreciate that we have not yet got to the bottom of the alarming earnings and dividend decline it will suffer over the next two years to get there. We re-iterate our sell."
