Having been lifted this week by rumours of private equity interest, shares of Next fell out of fashion after Cazenove said that the retailer may be losing its appeal.
“There is mounting evidence that the brand is reaching maturity in the UK, not least if the business is looking at negative like-for-like sales for the third year running into the first half of next year,” Cazenove told clients in a note downgrading Next from “outperform” to “in-line”.
The note read: “Next is a very well-run business which is highly cash-generative, but in the absence of stronger underlying sales momentum — against very weak comparatives — we suspect a further rerating will remain elusive.” Next shares, which traded without rights to the latest dividend, finished the day down 39p to £18.84.
The wider market went into retreat after a strong start, with the FTSE 100 index dropping 42.3 points to 6,160.3, as dealers closed their books ahead of the Thanksgiving holiday in America today. The fall came after a gauge of consumer sentiment from the University of Michigan came in below market expectations and as crude oil prices tumbled in reaction to data indicating a surprise build in US fuel reserves. BP was down 7p to 578p and Shell eased 15p to £18.66. Cairn Energy beat the trend, moving ahead 28p to £19.18 on reports from India that the group was in early talks with ONGC, the state-owned Indian oil company, to develop the Tapti oil block off the coast of Gujarat. The Tapti fields are close to Cairn’s developed oilfields.
That comes less than a month before Cairn spins off its main Indian assets on the local stock exchange, a move that has concerned some investors, who fear that Cairn’s main listing will become perceived as the UK equity stub of an Indian company. There have also been persistent rumours that Cairn could strike a deal over the Indian fields with ONGC ahead of the split. Analysts believe that Cairn management would have investigated the chance of a sale before pressing ahead with the flotation.
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Miners were strong, as copper prices pushed to their highest in more than a week, driven by Wall Street short- sellers squaring out positions before the holiday. Vedanta Resources was ahead 38p to £13.21, Antofagasta was up 6.5p to 479.5p and Xstrata took on 38p to £22.66. BHP Billiton gained 4p to 970p amid speculation that it could initiate a takeover approach on Freeport-McMoRan, which on Monday unveiled a bid for Phelps Dodge to create the world’s largest public mining company.
Specialists in the sector were worse off, with the platinum miner Lonmin down 29p to £30.51. That was after financial investors pushed platinum prices up by as much as 20 per cent to record highs yesterday, then reversed positions to send prices of the metal lower on the day. Jon Bergtheil, metals analyst at JPMorgan, reckons that half a dozen commodities funds are distorting the market for the lesser-traded metals, such as lead, nickel, zinc and platinum. The madness can continue as long as the funds keep attracting new investment, he said.
DSG International was the sharpest blue-chip faller, down 16p to 202.5p, after a trading statement from the electronics retailer revealed that sales and profit margins had slumped in Italy. Meanwhile, the property investor Liberty International retreated 81p to £13.30 after placing shares worth £337.5 million to pay for the August acquisition of Covent Garden Estates. On a more speculative tack, Wm Morrison rose ¾p as a story did the rounds that the grocer could be planning a sale and leaseback deal of property, with cash raised going back to shareholders in the form of a special dividend. The theory was premature, given that Marc Boland, Morrison’s new chief executive, is not expected to deliver findings on his strategic review before March.
NEW YORK: Technology shares climbed, helped by a strong earnings report from Dell, the personal computer maker. The Dow Jones industrial average closed at 12,326.90, up 5.30 points.