Broker snap: Credit Suisse cautiously optimistic for UK retailers

22nd Dec 2011 10:58

Credit Suisse has reassessed its forecasts across the European General Retail sector ahead of the January 2012 trading statement season."Demand conditions for 2012 remain uncertain, although we are cautiously optimistic on the UK environment versus the rest of Europe," the Swiss broker said."Annualising against the VAT increase, food price inflation as well as easing raw material costs (cotton) should provide some underpinning to UK forecast expectations. Operational gearing is an issue in the short term although investors are in our view aware of demand related issues and consumer pressures into 2012."Outperform ratings are given to Kingfisher, Next, N Brown, Dixons and Halfords.Underperform ratings are given to both Marks & Spencer and Home Retail. For M&S, Credit Suisse says that there is further downgrade risk given the "prolonged promotional activity and lack of flexibility around inventory control as it runs through its repositioning." While for Home Retail, the broker says it is likely to be "vulnerable to increased competition and higher levels of discounting in toys and entry level electrical products."Credit Suisse made the following recommendations:Kingfisher: Credit Suisse reiterates outperform rating and 310p target. Next: Credit Suisse maintains outperform rating and 3,000p target. N Brown: Credit Suisse keeps outperform rating and 335p target. Dixons Retail: Credit Suisse keeps outperform rating and 25p target. Halfords: Credit Suisse keeps outperform rating and 400p target.Marks & Spencer: Credit Suisse cuts target from 345p to 334p, neutral rating unchanged. Home Retail: Credit Suisse cuts target from 85p to 70p, keeps underperform rating. BC