Bad weather a disaster for British retailer

By Graeme Dickson
Updated:

 

The bad weather approaching Christmas must be a disaster for many retailers.

Look at the share price reactions for Home Retail (HOME), Dixons (DXNS), HMV (HMV) and Next (NXT) over the last week, falling on average by 8.6 per cent since last Wednesday.

Perhaps the same fate is waiting for Marks & Spencer (MKS)?

Marks & Spencer Group PLC chart

Marks & Spencer (M&S) is highly dependent on the economic state of the UK market.

The bad weather is almost analogous to rubbing salt in the wounds of British retailers' given the UK government austerity measures along with VAT increases set to take effect on 1 January 2011.

Additionally, rising input costs such as cotton prices, something that is regularly pointed out by its rivals (most notably SuperGroup (SGP) last week) and continued price investments in its food offering, will pressure margins.

Nonetheless, M&S's loyal customer base, leading market position and highly respected management team should make it bode well relative to its rivals - arch rivals that have already experienced quite savage drops in their respective share prices.

Expect support to come in at 330-340p with resistance at 395-400p.

Update

Randgold Resources – Suggested to sell at 5770p last week, the shares have drifted to 5490p, despite the gold price holding up. Lower the stop to 5770p but expect some support on the stock circa 5350-5400p. Through here we should expect retracement towards 5000p.

National Grid – Suggested to sell at 547.5p –the shares traded above the stop of 568p, so it should be closed.

Reed Elsevier – suggested to sell at 508p, the shares have moved up with the market, settling yesterday at 532.5p. Hold for now but if it closes above 540p I would be inclined to exit any short position.

G4S (GFS) – suggested to sell at 241.3p, the shares closed at 255.4p yesterday, primarily I believe on short covering for the year-end by various heavy hitting hedge funds. A close above 268p would probably be the point to stop oneself out.

The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Alpha Terminal.

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