Broker snap: Retail sector winners and losers

21st Dec 2010 12:39

Peel Hunt has evaluated the impact of recent weather disruptions at a crucial time of year for retailers, as the first companies begin to deliver snow-driven profit warnings.The broker highlights high street womenswear retailer Alexon's trading update as the first of many weak outlook statements. It reported a 19.9% decline in life-for-life (LFL) sales over the three weeks to 18 December, bringing the year-to-date LFL decrease to 4.7%.Analyst John Stevenson notes that while weather disruption will take the edge off performance for most, Alexon was hit harder than many due to its "older customer base and less gift-driven offers."Internet fashion retailer ASOS (Sell, TP 1,000p) will likely be hit by its inability to offer next-day delivery, which has led the company to bring forward the Christmas cut-off, along with other online retailers.The broker says that it expects little or no material disruption for the internet and catalogue home shopping company N. Brown (Buy, TP 300p).Stevenson predicts car parts and bikes seller Halfords (Hold, TP 480p) will benefit from the cold weather, as it will drive sales of high-margin winter products.While trendy fashion retailer SuperGroup will likely see some disruption, the strong online and sale and performance to date is expected to "leave the business on track for trading-driven upgrades in January," says Stevenson."Weak outlook statements in January, uncertainty over 2011 and inflation fears will have a negative impact on retail share prices in Q1 next year," he thinks, though this will give investors the opportunitiy to buy into structural growth retailers such as homewares retailer Dunelm (Buy, TP 600p).