By Steve Goldstein
A rally in the U.K. retail sector was curtailed Thursday as
Kingfisher reported woes from its Chinese operations and Next
predicted that same-store sales could drop as much as 9%.
Next said sales in the first half of the year may drop between
6% and 9%, after a 6.5% sales fall in the year ended Jan. 31.
Next's profit fell 15% to 302.4 million pounds ($441.6 million) and
the group held onto its dividend.
Shares of Next slipped 1.6%, though the stock is still up nearly
18% over the past three months.
"Despite the very weak outlook statement, the ability to pay a
full dividend may prove attractive to investors today," said Jean
Roche, an analyst at the U.K. broker Arbuthnot.
Investors were less forgiving of Kingfisher , with shares of the
world's third-largest home improvement chain dropping 2.3%.
The owner of the B&Q chain said its annual profit in the
year to Jan. 31 fell 24% to 272 million pounds after 160 million
pounds of charges, including a 124 million pound write-off in China
and another 107 million pound hit to revamp stores there.
For the year, its dividend was cut by 27% to 5.32 pence.
"With no current trading statement, [and with] fourth-quarter
revenues and gross margins pre-announced, today's full-year results
are largely as expected. New today was the scale and scope of the
China strategic update, [and] the exclusion of around 18 million
pounds of losses and refit initiatives should underpin our China
loss forecast of 40 million pounds to January 2010," said analysts
at Citigroup.
Over three months, though, Kingfisher still showed gains, with
the stock up close to 7%.
For the sector as a whole, retail sales fell 1.9% in February,
which was weaker than expected. The annual rise of 0.4% was the
slowest since September 1995.
More broadly, the U.K. FTSE 100 closed up 0.6% to 3,925.20,
boosted by a rally in financial stocks.
Shares of Barclays and Lloyds Banking Group rose more than
12%
Shares of Man Group gained 5.5%. The hedge fund manager said its
annual-adjusted profit dropped 43%, but it also plans to launch a
new investment-management business. The group also maintained its
dividend payment.
Outside the FTSE 100, Northern Foods shares nearly 9%. Helped by
customers buying more supermarket-label food that Northern Foods
produces, as well as launches of its own value ranges,
fourth-quarter comparable sales climbed 8.8%.
Shares of PV Crystalox Solar lost 10% as the group warned that
it may not ship all the silicon wafers that it has contracts to
deliver. Its profit for 2008 more than doubled, to 103 million
euros.
Shares of Canary Wharf-landlord Songbird Estates slumped nearly
19%. It swung to a 1.7 billion pound loss in 2008, from a 205.6
million pound profit in 2007, and adjusted net asset value per
share dropped 70% to 64 pence.
It said there's a "material risk" it will violate loan
covenants.
Separately, American International Group has been forced to post
more than 500 million pounds as collateral to cover possible
default on rental payments in Canary Wharf leased by Lehman
Brothers and Citigroup.
Even though Lehman's bankrupt, it hasn't defaulted and part of
its space has been subleased to Nomura, which bought much of
Lehman's operations in the U.K.
Utilities also weighed on London, with International Power
falling 2.5% and Scottish & Southern falling 3.3%.
A downgrade to neutral by Credit Suisse pressured
InterContinental Hotels , which fell 2.2%.