Market Report: Trade in Tesco turns spotlight on sector

THE STOCK market was intrigued by a big trade in the shares of the Tesco supermarket chain.

Barclays de Zoete Wedd was believed to have bought 29 million shares at 171.5p and then sold them on at 173p. There was confusion over the identity of the other parties involved.

One suggestion was that Baillie Gifford, the Edinburgh-based fund manager, was the seller, with PDFM, the old Phillips & Drew Fund Management, the buyer.

Before the deal, Tesco shares were bumping along at 175p, the lowest for four years.

But the trade inspired the thought that bombed-out supermarket shares, the worst-performing sector this year, may have hit their low point. It is a view not shared by James Capel which, like Smith New Court earlier this week, is decidedly bearish on the food retailers.

Capel can find little to enthuse about. It reckons Tesco and its arch rival J Sainsbury should be sold. To support its case it produced some telling profit downgradings. Tesco's current-year estimate is cut by pounds 10m to pounds 595m, next year's by pounds 40m to pounds 600m and the following year's by pounds 80m to pounds 600m.

Sainsbury is sliced by pounds 20m to pounds 790m, by pounds 65m to pounds 830m and by pounds 110m to pounds 880m.

The weight of such downgradings left their mark. But Tesco, following the share deal, managed to end the session with a 4p gain to 183p. Sainsbury lost 2p to 366p and Argyll, the Safeway group, 2p to 249p. Kwik Save fell 7p to 592p.

Worries about increased competition from discounters and the US-style club warehouses prompting a price war have combined to destroy the glamour ratings of the supermarkets which, during much of the past decade, seemed to be on their own particular gravy train as rampant inflation masked price increases.

The rest of the stock market succumbed to profit-taking and the FT-SE 100 index, despite a firm New York opening, had to be content with a 1.2-point gain to a 3,099.7 close against a day's high of 3,111.5.

Inchcape, the international trading group, gained 14p to 493p as Robert Fleming Securities, bearish for much of the year, adopted a more positive stance.

Fleming's Mike Smith believes the shares, earlier this year priced at 637p, have fallen so far that they are now a buy. But he said: 'I would not chase them at this level but buy into weakness.'

Wednesday's newcomers were uncertain. Allders, the department store group, fell 2p to 182p. Charles Sidney, the car dealer split from the Albert Fisher food group, lost 7p from its offer price to 103p.

Regional electricity shares were strong but the waters were more subdued, ruffled by disappointing figures from Northumbrian.

Lloyds Chemists, ahead of an investment presentation at Panmure Gordon, slipped 1p to 274p. Amber Day, the hard- pressed What Everyone Wants retailer, was unchanged at 52p as it agreed terms to sell its importing side through a management buyout.

Most retailers were unsettled by the Burton results. Burton fell 10.75p to 66.25p and Storehouse 9p to 185p.

Betterware, the direct selling group, had another poor day, dropping 11p to 158p, a fresh year's low.

The shares have been hit by bear raiders, fretting about a slowdown in the group's British operations and the cost of the European build-up.

Euro Disney remained in the ghetto, falling another 68p to a new low of 368p. Figures also disturbed Sherwood Computers, down 60p at 85p.

Hopes of television bid action attracted attention to LWT (Holdings), where Granada has built a near-20 per cent interest. Talk that the Government will relax takeover restrictions helped LWT 10p higher to 508p. Anglia, another bid favourite, improved 16p to 315p.

Yorkshire-Tyne Tees TV, where losses are expected and Clive Leach has quit as chairman, gained 15p to 206p with those takeover hopes sparking the advance.

The strong bullion price helped gold shares with Bakychik Gold, a gold mining venture in Kazakhstan, part of the former Soviet Union, jumping 19p to 180p. Monarch Resources rose 7p to 185p.

The disaster at Maddox, the computer group, left the shares at 1.75p, down from 3p.

IMC Industries held at 3.75p. Mercury Asset Management has become the in-flight entertainment and soft drink group's first significant institutional shareholder by paying pounds 368,000 for 11.3 million shares. The group is also making a rights issue to raise pounds 616,000. The cash will come in useful if IMC decides to exercise its option to acquire 12.2 per cent of thetroubled International Communication & Data.

David Cicurel, IMC's chairman, is also chairman of ICD, where a privately owned marketing group, PSB, is seeking to gain control.

Once again shares failed to hold best levels, with the FT-SE 100 index up 1.2 points at 3,099.7 and the FT-SE 250 index down 5.8 at 3,434.6. Turnover was 743.8 million shares from 29,165 bargains. The account ends today with settlement on 22 November.

Shares of Mining & Allied Supplies, the bearing distributor, put on 2p to 27.5p, highest for four years. There is talk of a development being announced next week. The group, which controls a Canadian distribution business, recently sold property for pounds 1.4m and is cash rich. Profits are due next month and more than pounds 800,000 is likely. Last year it produced only pounds 42,000.

Worries are growing about losses at First National Finance Corporation. The shares fell 3p to 56p. They have lost 14p in two days. Last week the finance house warned of further losses on its property book and its chief executive, Tom Wrigley, took early retirement. There is talk that year's losses could reach pounds 30m. Last year the group suffered a pounds 57m loss.