Retail results help lift London stocks

By Neil Dennis
Published: March 25 2010 08:39

London equity markets had a distinctly retail flavour on Thursday after two of the FTSE 100’s top consumer-led stocks reported full-year earnings, while February sales data showed a pick-up in shopping activity.

Both Kingfisher, operator of Britain’s top DIY chain, and Next, the fashion retailer, reported earnings that beat market expectations, but both were cautious about their prospects for 2010, joining the chorus of retail groups that have already reported.

Kingfisher, the owner of B&Q, said annual profit jumped 49 per cent to £547m, beating an average forecast of £543m. The company lifted its dividend for the first time in five years, by 3.3 per cent to 5.5p a share.

Ed Woolfitt at Galvan Equity Research was impressed by the results and unperturbed by the cautious outlook.

He said: “With growth seen in virtually all its markets, the momentum is very much with Kingfisher now and we are projecting a return to year highs of 249p and beyond in the next few weeks as the markets take on board the actual pace of the turnaround.”

After early gains, however, profit taking set in on the shares, which fell 0.7 per cent to 226.8p.

Next reported an 18 per cent rise in pre-tax profit for its 2009/10 year to £505m, thanks to a strong Christmas performance, new product lines and stringent cost and stock controls. The company raised its dividend by 20 per cent to 66p a share. Its shares jumped 4.9 per cent to £21.71.

“Management caution about the macro economic outlook is all pervading but should be seen in the context of Next’s record of calling things too cautiously,” said analysts at Oriel Securities. “We are happy buyers of these shares to £24.”

Much of the sector was spurred higher, given an added boost by retail sales data that showed consumers returned to the shops in February after snow and VAT increases kept them away at the beginning of the year.

FTSE 100 peers Home Retail Group and Marks and Spencer rose 0.8 per cent to 275.6p and 1.7 per cent to 362.4p respectively.

On the FTSE 250 Sports Direct added 2 per cent to 109.7p, DSG International, owner of the Dixons stores, gained 1.8 per cent to 35.3p and Kesa Electricals climbed 1.3 per cent to 127.2p.

Thanks also to gains for banks, oil and mining groups, the FTSE 100 gained 21 points or 0.4 per cent to 5,699.28. Meanwhile, the FTSE 250 was lifted mainly by housebuilders, which continued to get a kick from the stamp-duty news announced in Wednesday’s UK Budget.

Bellway, which also announced better-than-expected earnings on Wednesday rose 1.3 per cent to 769.6p, while Persimmon gained 3.1 per cent to 474p and Barratt Developments climbed 1.7 per cent to 130.7p.

Overall, the mid-cap index gained 70 points or 0.7 per cent to 10,151.72.

United Utilities was lifted 1 per cent to 547p after it revealed in a trading update that low financing costs would help it deliver solid results in the current year.

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