General falls and Next´s good prospects

Wednesday, 03 August 2011
General falls and Next´s good prospects Overnight, Japan's Nikkei index fell an average of 1.3 per cent and Hong Kong's Hang Seng was down 0.7 per cent. In similar pattern, share prices in France and Germany also slid by 0.5-0.7% today, and in London the FTSE 250 of medium-sized companies was showing a 1.3% drop at lunchtime. Infected with this gloom, the FashionUnited Top 100 closed at 1,321.07, down by 22.23 points.

'Focus has switched, at least temporarily, from the debt crisis in Europe and the U.S. to global growth concerns with nearly a third of major global economies showing a deterioration in manufacturing,' Jimmy Yates, head of equities at CMC Markets, said.

In the UK, and ahead of Next’s trading update this afternoon, GLG Partners has hailed the retailer as one to benefit as the UK trading environment slowly improves and as it starts to exploit its online potential. It is well worth a note that Next has risen 18% in the year to date, beating the FTSE 100 and its peers in the FTSE All Share General Retailers index.

GLG, one of Europe's biggest hedge fund firms, said in a research note it believed Britain was passing an ‘inflection point’ for top line growth. A sign of this was the fact that cash flows for households appeared to have bottomed out in the first quarter, according to the group. “Next, which has re-rated in line with the sector thus far but seems destined to outperform strongly as market participants appreciate the tremendous promise of its online trading division,” GLG said.

Across the Atlantic, RBC Capital Markets analyst Howard Tubin speculated that the July heat helped drive shoppers to air-conditioned malls. He said that off-price retailers, such as The TJX Companies Inc. or Ross Stores Inc., which aren't always in traditional malls, probably didn't get the same benefit from the heat wave.

But he said they'll continue to fare well because of "the increasingly difficult-to-interpret macro environment." Because of the worries over consumer spending, teen retailers' stocks performed Tuesday roughly in line with how expensive they are.

Abercrombie's stock fell $4.21, or 5.6 percent, to $71.07. American Eagle fell 33 cents, or 2.5 percent, to $12.73. Aeropostale fell 32 cents, or 1.9 percent, to $16.30. Gap fell 40 cents, or 2 percent, to $18.93. TJX fell 96 cents to $53.78. Ross declined $1.55, or 2 percent, to $74.76.

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