Retailers were under pressure today amid worries over Christmas trading, and as Deutsche Bank cut its stance on a number of high street names saying demand is likely to soften in 2017.
In a note to clients, the bank’s analysts cut their rating for Next PLC (LON: NXT) to 'hold' from ' buy', taking the price target down to 5,300p from 5,950p, with the clothing stores group set to kick off the festive trading updates from the sector tomorrow.
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The analysts also downgraded their stance on bicycles to car parts retailer Halfords Group PLC (LON:HFD) to 'sell' from 'hold', cutting their price target to 310p from 320p.
And they cut department stores operator Debenhams PLC (LON:DEB) to 'sell' from 'hold', trimming its share price target to 52p from 60p.
In reaction to the downgrades, around midday, Next shares topped the FTSE 100 fallers list, down over 3% to 4,819p, while FTSE 250-listed Halfords lost over 5% to 344.6p, and mid–cap peer Debenhams shed almost 2% to 56.25p.
Growth retailers wanted …
Overall, the analysts said: "Retail stocks are typically early-cycle but there are risks a prolonged downturn means many could be value traps, particularly as the sector is typically showing average rather than extreme valuations.
"We like growth retailers and those with self-help, whilst we are a little wary of apparel retailers and find online stocks generally too expensive."
They said their top sectors picks are Primark clothing stores-owner Associated British Foods PLC (LON:ABF), electricals retailer Dixons Carphone (LON:DCG), and discount chain B&M European Value Retail PLC (LON:BME).
New Year woes …
The cautious sector comments came after a report today showed UK retailers were hit by a drastic drop in the number of bargain-hunting shoppers passing through their doors on New Year's Day.
Figures from retail analyst Springboard Insights said shopping centres saw footfall plummet by around half compared to the same day in 2016, while high streets were also noticeably short of customers, down 12.7% on the previous year.
Bad weather, reduced opening hours and spending sprees at the start of the festive period were all blamed for the dip.
On average, the weekend as a whole saw a drop in footfall of 16.1% across high streets, shopping centres and retail parks, the analysis said.
Online helps …
But increased sales poured in over the two days thanks to online shopping, which shot up 6.8% - including 18.2% on New Year's Eve.
Diane Wehrle, Springboard's insights director, said: "Retailers traditionally see the first trading weekend of the New Year as a sign of things to come, and if this still rings true the industry is set for a rocky 2017."
She added: "The ease and comfort of online shopping proved too enticing for shoppers keen to snap up further discounts in the sales rather than bracing the cold outdoors."