Market Report: Gloomy outlook for 2011 sees supermarkets fall

Anxiety over what 2011 will bring for the supermarkets weighed on the sector yesterday, with Morrisons taking the biggest hit after Morgan Stanley said it was "becoming increasingly concerned about [its] prospects".

There was a fall of 3.9p to 267.1p for the Bradford-based company as the broker downgraded its recommendation to "underweight". Morgan Stanley analyst Geoff Ruddell said consensus forecasts that it "will deliver a further 10 per cent profit growth in the coming year... looks far too optimistic to us."

However, Mr Ruddell was cautious about the industry as a whole, saying he was "much less confident about 2011" as Morgan Stanley's rating on the European food retailers was reduced to "in-line" from "attractive".

J Sainsbury, which retreated 4.2p to 380.8p, was the only UK company whose shareholders should be optimistic, he said, asking whether "the time may be approaching when Tesco will need to admit that it is no longer capable of growing earnings at 10-12 per cent per annum".

The UK's biggest supermarket was 5.25p lower at 403.75p, as Evolution Securities also suggested it should reduce its prices. The broker's analysts believe a price war would see Tesco "emerge as a clear winner" and improve its position after it "has lagged in underlying UK sales growth and... failed to regain momentum."

Overall, a late dip left the FTSE 100 79.73 points weaker at 5,976.7, falling back from Tuesday's 31-month high. Disappointment over the latest unemployment numbers and results from Goldman Sachs had an effect, with ETX Capital's Manoj Ladwa noting that "what started off as light profit-taking... turned into a bit of a rout".

In a busy day for results, the top-tier index's pole position was taken by Pearson, which rose 45p to 1,051p following a trading statement in which it increased its profit forecast for last year.

Land Securities made a more modest gain of 4p to 694p despite a positive third-quarter interim management statement. Even though it said the company "remains an appealing long-term story", Panmure Gordon kept its "hold" recommendation on the group, citing its current valuation.

Many of the retailers were in difficulty yesterday, especially Kesa Electricals, which fell 14.8p to 136p on the mid-tier index. The owner of the Comet chain released its third-quarter update in which it said its like-for-like sales had dropped by 7.3 per cent.

Its assertion that the VAT increase had knocked trading since the new year was not welcome news for other high-street chains, and Home Retail and Debenhams slid back 4.3p to 221.2p and 1.75p to 68p respectively.

Meanwhile HMV retreated 0.75p to 25.5p after releasing a statement in which it admitted that "credit insurers are reviewing the level of cover they provide on the group". As a result, it said, there has been a "reduction in the availability of credit insurance to certain of the company's suppliers", although it clarified it has "had no difficulty in obtaining stock".

Takeover chatter pushed Tate & Lyle towards the top of the FTSE 250, closing 26.5p better off at 564.5p, as market gossips became excited over rumours of a potential bid priced between 750p and 775p-a-share. The vague talk centred around possible interest coming from a US company, with both Archer Daniels Midland and Cargill named.

Speculation about a possible approach continued to boost Soco International, as it advanced 5.2p to 370.2p, with Evolution Securities doing little to dampen investors' excitement. The broker said the "best way to monetise [its] Vietnamese assets is through a disposal of the entire company", adding "it could be in everyone's interest... to entertain offers in excess of 400p".

Meanwhile, Charter International was lifted 5.5p to 835p as Panmure analyst Oliver Wynne-James said that the engineering group "is one of the clearest demerger candidates in the... sector". Although he ruled out such a move actually happening, he did say that speculation on the subject could emerge anyway and push its price up.

There was a surge of 12.3p to 189p for William Hill, with the bookmaker revealing its operating profit for the year should come in near the top end of forecasts. JD Wetherspoon was also doing well after its pre-close statement, and the pub group jumped up 23p to 464.7p.

Small-cap group Assura, the primary care property company, was 1.25p stronger at 47.5p as it agreed a £23.8m takeover of sector rival AH Medical Properties (AHMP).

Ashley House, which is the property partner of AHMP and a major shareholder, looks set to be a beneficiary, with the company saying it expects to receive over £4m if all goes to plan. The group, which is listed on the Alternative Investment Market, was bumped up 2p to 29p.

There was a large climb of 133p to 1,683p for the clothing website Asos following a trading statement in which it said overseas sales rose by over 150 per cent in the final quarter of 2010.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine