Investors fear Archie's party at Asda may be be over

MARKET REPORT
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The Independent Online
Is the party over for Archie Norman and his Asda superstores chain? The shares, up from 22.8p since he moved in to rescue the then ailing retailer, slipped from their seven-year high, closing 1.5p down at 118.5p.

Mike Dennis at NatWest Securities ruffled sentiment. A long-time fan of the group, he cut this year's profit forecast from pounds 352m to pounds 335m although he is sticking with pounds 304m, which would represent a pounds 46.8m advance, for the year ended last month

As the Norman touch has transformed the business Asda has enjoyed heady progress. Over the next three years, however, growth is likely to slow dramatically. Mr Dennis was expecting 11 per cent for the current year but has cut his estimate to 7 per cent.

The slowdown is due mainly to disappointing non-food sales, a reduced new store openings programme and the extra overheads, such as back-up facilities and more expensive staff, Asda is incurring in its battle with the other supermarket giants.

Mr Norman's latest blast in the price war, a promise to sell petrol at cost from its 10 hyper markets, can only further erode profits. Last year the group's petrol retailing was worth around pounds 12m to the pre-tax figure.

Asda suffered a run of misfortune with its shares falling from a 176p peak in 1987. Under the Norman guidance it has thrown off its jokey, cloth- cap image and taken the lead in many retailing initiatives. It should in its current year reap rich rewards from the flotation of Allied Carpets where it has a 40 per cent interest.

Mr Dennis' new supermarket choice is Argyll, which he has moved from hold to add. The supermarket climate was also influenced by Andrew Fowler at UBS who said industry trading conditions could "only get better".

Argyll rose 6p to 350p; J Sainsbury 5p to 384p and Tesco 6p to 293p.

The rest of the stock market was unsettled by the signalled departure of Jeffrey Vinik, the powerful Fidelity fund manager who ran the high- profile Magellan Fund. Under his guidance it grew from $20bn to $50bn.

But he has found the going increasingly tough and recent gambles, such as moving into bonds, have not paid off, raising questions about the fund's performance.

Magellan is believed to be heavily involved in the London market, particularly in hi-tech shares. It is also believed to have latched on to Reuters, SmithKline Beecham and Vodafone, among others.

There is an obvious fear the Vinik departure could lead to a change in Magellan's policy and although the Americans would be too smart to dump shares the very presence of an overhang could have a depressing influence.

The market was in the dumps even before the Vinik retreat. The FT-SE 100 index, in busy trading, fell 17.2 points to 3,747 with an early gain obliterated, largely by political worries and book-squaring before the holiday weekend.

Takeover speculation again swirled around Lucas Industries, up 6p to 237p in busy late trading. Directors, it was said, would meet today to rubber-stamp the merger with Varity, a US car parts group.

The US deal has assumed growing importance. At first it was dismissed as a sideshow ahead of a Continental or US bid. Now there is speculation Varity could bring unsuspected riches to Lucas.

Christies International, the fine art auctioneer which is expected to go under the bid hammer, rose 2p to 227p. There was talk Joseph Lewis was meeting his financial advisers in London about offers he has received for his near-30 per cent shareholding. A deal with Prince Jefri Bolkiah of Brunei, who captured jewellers Aspry, is thought likely.

Utilities, after Wednesday's weakness, staged modest recoveries although National Power fell a further 3.5p to 516.5p. Mid-Kent, a water company, dipped 12p to 423p, after a French takeover bid was referred to the Monopolies and Mergers Commission.

Pilkington, the glass group, cracked on worries profits could be under pressure. There was talk of possible profit downgradings following a cautious presentation from Saint Gobain, the French group, which left analysts with the impression glass prices were weakening. Pilkington fell 6p to 194p. T&N, on German car components gloom, skidded 7p to 148p.

On the drugs front Cortecs International was little changed at 351p. A positive statement and cash call are rumoured. Newcomers Mulberry reached 185p from a 153p placing; Epic Multimedia held around its 105p issue price.

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