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The UK's well-run supermarket chains have also often been admired for their defensive qualities in times of hardship. But perhaps not for much longer.
Oriel Securities reckons our biggest grocers have lost some of their sparkle of late and that better value can be found elsewhere in the general retail sector. It is urging clients to sell.
The broker argues: "With the general retail sector showing continued green shoots of recovery and the food retail industry largely reliant on inflation for its sales growth, we think that the relative valuations between the sectors are discounting too much good news on the food side and the opposite on the non-food side."
It is also worried about the effects of increased competition and slowing inflation, which continue to hang like a cloud over the food retailers. It remains a seller of Wm Morrison, down 1¾p at 253¾p, and Tesco, 1.5p off at 331.9p, and urges clients to look for better options in the non-food retail sector. J Sainsbury eased 1p to 312p.
Marks & Spencer climbed back above the 300p level for the first time since August last year with a rise of 7¼p to 303¼p. Good news for M&S shareholders, but brokers are attributing the rise to a continuing bear squeeze, rather than any satisfaction with yesterday's trading update. Société Gé*érale has raised it target for the retailer from 300p to 397p and repeated its buy rating.
It says newsflow tends to provide a better indicator of share-price behaviour than valuation multiples. JP Morgan has also raised its sights on M&S from 310p to 335p with an overweight rating. It says operational improvements following management changes are continuing to pay off. Other retailers drew encouragement from the performance by M&S. Home Retail put on 13p at 237¾p, while Kingfisher added 6.2p at 155.9p and Next put on 42p at 1366p. Trader's stock shortages tend to exaggerate price movements.
Debenhams seemed a little steadier, trading 3¾p up at 51¾p. It followed yesterday's disposal, by the administrators of collapsed Icelandic bank Baugur, of its entire stake of 116 million shares, or 13% of the department stores retailer.
Citigroup says the shares sale cleans up the shareholder register by removing a significant stock overhang. It says the balance of the register now has a more typical make-up of longer-term investors, including venture capitalists Texas Pacific and CVC, which between them own a further 22% of the equity.
Citigroup has raised its rating on the shares from hold to buy and has jacked up its target from 45p to 70p. The brokers say the removal of the Baugur stock overhang may now allow Debenhams to proceed with a rights issue, which would be used to help reduce debts of almost £1 billion.
With the Square Mile protesters providing a distraction, shares generally lacked direction. But they managed to trade above their worst levels of the day after an early bout of profit-taking petered out. The FTSE 100 fell 12.87 at 3913.27. Among the leaders, BT shaded a penny to 77.2p - just a tad above its record low of 71.4p - after Goldman Sachs dropped its rating from neutral to sell and cut its target from 102p to 70p. It expects the communications giant to prop up its balance sheet by scrapping the payout to shareholders in the second half of this year and the whole of 2010. As a result, it says the shares will underperform.
Goldman Sachs has taken its red pencil to share-price targets of the oil and exploration companies. Cairn Energy, 3p better at 2178p, remains a conviction buy, but has been slashed from 3062p to 2663p, along with Salamander Energy, 1½p off at 129p, from 255p to 229p. Dana Petroleum, 50p higher at 1161p, is rated at neutral, but has been dropped from 1528p to 1379p, along with Premier Oil, 34p dearer at 1097p, 1348p to 1283p, Soco International, 35p better at 1215p, 1868p to 1388p and Tullow Oil, 4p off at 799p, 1051p to 949p.
Land Securities hardened 2¾p to 440p despite UBS raising its price target from 380p to 465p.
