London’s blue-chip stocks were higher on Tuesday, but news of a potential Sainsbury’s bid for Home Retail failed to impress investors.
Shares in the grocer plummeted, after the surprise announcement.
The idea is to bring together two well-known British retailing names to sell a wide range of products through multiple channels, according to analysts, with some already dubbing the new brand “Sargos”.
The supermarket group made an offer to buy the Argos and Homebase owner last year, it also revealed.
Sainsbury’s shares dropped around 5% on the day to 13p, while Home retail saw its shares rocket some 40% to 138p.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Early share price reaction from a Sainsbury perspective points to investor caution.
“Home Retail remains a company in transformation, with sales at Argos still yet to convince, whilst the combination of food and non-food, combined with a bank offering, to some degree, potentially reflects the still troubled Marks & Spencer.”
It was the FTSE100’s biggest faller along with fashion retailer Next (LON:NXT), which blotted its pristine copybook with a downbeat festive trading update on Tuesday, sparking fears that it could herald more bad news from the industry.
The fashion retailer, known for bucking downbeat high street trends with upbeat trading statements, blamed mild autumn weather and a stock shortage for a disappointing fourth quarter performance.
Shares lost around 5% to 6,835p but could not stop the FTSE100 from ending the day slightly higher at 6,122, a gain of 30 points.
Fellow fashion retailer SuperGroup (LON:SGP), was also caught in the cross-hairs as the whole sector ailed in the aftermath of Next’s profit warning.
The Superdry owner slipped 6.2%, or 103p, to 1,542p.
Away from the index, miners were near the top of the index as commodities largely held on to the gains made on Monday.
Gold was around US$5 higher again on Tuesday at US$1,079, while silver was 1% higher at US$14.02 and platinum nudged up US$7 to US$890.
Evraz (LON:EVR) climbed 6% or 4p to 72p while Glencore (LON:GLEN) lifted 3% or 2.6p, to 87.8p.
In the small cap world, Sigma Capital Group (LON:SGM) jumped 13% to 106p after the firm said it expects to beat market hopes for the year after a strong second half.
Pre-tax profit for the year is forecast to be around £2mln, far ahead of previous expectations.
Conversely, Greka Drilling (LON:GDL) dropped around 22% to 4.2p despite issuing a statement saying it knew of no reason for the fall. Its operations update is due next month.
In other news, MySQUAR (LON:MYSQ) leapt 16% to 6.1 after explosive growth in user numbers of the Myanmar-language social media platform operated by the company has taken even its management by surprise.
At the end of the year, the total number of users of MySQUAR's products had topped 2mln – an increase of more than 150%.