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They threw the switch on the Christmas lights in London's Regent Street and Oxford Street last night, and, as if on cue, shares of some our major retailers lit up this morning.
Shares in the UK's best-known retailer Marks & Spencer drew the oooh's and aaah's of City investors as they climbed 18¾p to 359¾p, after City traders gave the thumbs up to first-half profits.
Pre-tax profits of £298.3 million showed little change on the corresponding period last year, but were still at the top end of brokers' forecasts. The operator of the 650-strong chain of stores across the UK also achieved a rise in sales of almost 3% at £4.3 billion during the six months to 26 September. The payout to shareholders remains unchanged at 5.5p a share.
Chairman Sir Stuart Rose warned that consumer confidence remained fragile. But he was confident that full-year consensus on profits would edge higher. He said the company had sharpened its offer in the run-up to the all-important Christmas trading period. Seasonal promotions would be about the same as last year.
Last year, M&S saw profits slump by more than 40% as the global recession made its impact felt on consumers.
Hargreaves Lansdown has repeated its hold rating on M&S. It says the company's performance has contributed to a slowly improving overall picture. Singer Capital Markets reckons it indicates that trading conditions in October improved and that the company had enjoyed a good start to the third quarter. But it cautioned about the competitiveness of the market and the outlook for Christmas. Goldman Sachs remains bearish of M&S. It says October saw a pick up in trading as comparatives got weaker.
Next also spiked 111p to 1921p at the top of the leaderboard. It has raised its guidance on second-half prospects despite warning that it was budgeting for negative life-for-like sales in the spring and summer collections next year.
The performance of M&S and Next also gave a lift to the retailers. Home Retail, which owns Homebase and Argos, put on 17p at 301p, while Kingfisher added 7½p at 231½p, and Burberry firmed 3p at 550½p. Department store operator Debenhams stood out among second liners with a rise of 5p at 81½p. It trading update last week also drew cheers from investors. Credit Suisse has raised its target price from 62p to 68p.
The good news from the High Street helped underpin the rest of the market where share prices bounced back from yesterday's sell-off. The FTSE 100 index rose 35.79 to 5073.00.
Firmer metal prices cheered the miners with Randgold adding 221p at 4527p, Fresnillo put on 52½p at 803½p and Kazakhmys added 69p at 1189p.
Second-line stocks were boost by a bullish trading update from the UK's second biggest housebuilder Taylor Wimpey, up 2.6p at 39¾p. That helped drive the FTSE 250 Index 170.96 higher at 8927.64. Debt laden Taylor Wimpey said it was now fully sold for 2009 after seeing a pick-up in business since July. The builder also went on to talk about improved market conditions, lower debt levels and rising house prices.
Other builders fed upon the news with Persimmon, which dropped out of the Footsie 100 earlier this year, putting on 35¼p at 418½p, while Redrow expanded 8p to 150½p, Berkeley Group 55½p at 886½p and Barratt Development 8½p at 129½p. Barratt's recent cash call was taken up by 92.2% of shareholders.
Cadbury retreated 5p to 772½p as hopes of Kraft Inc improving its 745p a share bid suffered a setback. The US food giant overnight reported weaker than expected third-quarter revenues of $9.8 billion (£5.9 billion) — well down on the consensus forecast by analysts of $10.32 billion.
Kraft chief executive Irene Rosenfeld said: “Clearly, there has been a lot of speculation about what we can afford given these parameters. But as we said before, what we can afford is not relevant. What is relevant is what Cadbury is worth, and that will guide our actions.”
Kraft has been testing the water with Cadbury shareholders to see what price they would accept in order to back the bid. But JPMorgan believes Kraft is likely to stick with its current offer and may even be tempted to walk away and wait another year until Cadbury shareholders have a better view of long-term prospects. The US bank has cut its target for Cadbury from 820p to 780p.
