Retailers under pressure with Next stock leading decline as Footsie dips

FTSE: 5,965.08 (–4.13) Mid 250: 11,617.43 (+5.16) Small Cap: 3,281.08 (–1.86)RETAILERS HELD the FTSE 100 back yesterday, after the sector was hit by a surprise fall in profit at Swedish clothing chain Hennes Mauritz, which has a strong presence in the UK.

News of the disappointing performance re-stoked fears about the outlook for the high street for 2011, with pressure on margins from rising costs coinciding with uncertainty about consumer spending.

The list of the biggest fallers on the index was peppered with the sector’s biggest names. HM’s close peer Next led the decline, down 2.7 per cent at £20.40 and Marks and Spencer fell 1.5 per cent to 361.7p.

Overall, the FTSE 100 slipped 4 points to 5,965.08, with lingering demand for oil stocks helping prevent a steeper decline.

Sentiment on global markets became more cautious after SP cut its rating on Japanese sovereign debt from AA to AA-minus.

“A touch of weakness crept into the FTSE on the open after a downgrade on Japan’s sovereign debt from Standard Poor’s offset any strong corporate results,” concluded Manoj Ladwa, senior trader at ETX Capital.

The plight of retailers was also apparent on the FTSE 250, where Dixons fell 3.5 per cent to 21.4p and Home Retail, the owner of BQ and Argos, lost 1.6 per cent to 213.1p.

Kesa Electricals was 2.5 per cent weaker at 128.9p.

The second-tier index was also supported by mid-cap resource companies and rose 15 points to 11,626.99. Heritage Oil looked undervalued, as a steep selling over the previous session followed disappointing news from one of its Iraqi oil prospects.

After a 29 per cent slump over the previous session, they rose 6.6 per cent to 333.8p, the best single showing on the index.

Back on the top tier, interim profit at pay-TV broadcaster BSkyB beat forecasts, adding to pressure on major shareholder News Corp to increase the price of its 700p-per-share bid to take full control of the company. Operating profit in the period rose 26 per cent to £520. Shares in BSkyB added 0.6 per cent to 767p.

Nick Bell, equity analyst at Jefferies International, said: “We raise our price target to 800p per share from 760p, as BSkyB’s strong interim results strengthen the board’s position that it will not accept less than 800p from News Corp.” – (Copyright The Financial Times Limited 2011)