Broker snap: Weather to dominate retailers' results, says Nomura

5th Sep 2013 10:56

Nomura has reiterated its 'bullish' view on the European retail sector, saying that while the macro signs of recovery are clear, the weather will likely drive updates from a host of companies this month.On the whole, Nomura said it remains upbeat about UK retail "as we expect a housing market recovery to drive down the savings ratio and increase discretionary consumption".However, the broker said that September's upcoming round of company reports "is likely to be a mixed bag" with the warm summer weather likely to have had a positive and negative impact on sales of a different goods.For example, Nomura pointed out that the heat most likely helped fashion retailer Next sell more items at full price and drove up seasonal sales at DIY group Kingfisher, but flattened demand for consumer electronics at Home Retail and for home furnishings at Dunelm.In spite of the overall 'bullish' stance on the wider European sector, Nomura only has a 'buy' rating for UK-listed Home Retail, the owner of Argos and Homebase chains, despite electricals and indoor home categories expected to have been adversely affected by the good weather. An improvement in seasonal sales however (which accounted for around 10% of the sales mix in the second quarter) should offset this, the broker said."We recently moved to a 'buy' rating for Home Retail. We see Home as the most leveraged to a UK recovery, and believe that much of the weakness of recent years have been cyclical (eg, significant fall in furniture sales). In addition, we believe this lessens some of the pressures on the company and lowers the execution risk on its five-year Argos strategy."Home Retail, which was trading 3.51% higher at 150.3p by 11:13 on Thursday, will report a second-quarter trading update on September 12th.Nomura has retained its 'neutral' rating for Kingfisher, Next, Dunelm, Debenhams and ASOS.BC