FTSE in-depth: Even Primark feels the pinch

By Geoff Foster for MailOnline
Updated: 03:24 EDT, 27 April 2011

Fashion guru Mary Portas recently toured Primark's flagship store in Oxford Street and found the experience apparently not to her liking.

Foster: Post-Easter trading left a lot to be desired.

She scored it a disappointing four out of ten and wondered if the mood on the High Street is changing, as growing numbers of consumers start to ask for more from their fashion shopping than a £3 T-shirt and a three-mile queue.

The discount clothing chain has been AB Foods' star performer in recent years as it has ridden the boom in demand for budget clothing on the High Street, but consumers are now feeling the pinch more than ever and the growing number of bears, including Portas, now roar that the good times for Primark could be coming to an end.

Shares of AB Foods were sold down to 1028p on fears that today's interim figures will paint a gloomy picture for Primark before they rallied in sympathy with the general market trend to close 5p dearer at 1045p, still 13% below the year's high.

Primark last month warned that consumer demand was set to slow as Britons feel the pinch. The mood has changed among shoppers since the beginning of the year following the VAT hike to 20% and the strong rise in global cotton prices.

Goldman Sachs yesterday reiterated its conviction sell on AB Foods, saying the 7% rise in the share price over the past month is unjustified. It downgraded its 12-month target price to 874p and said that the main risk to its price target is strength in the European sugar market and the current deficit causing upside to pricing despite deteriorating world prices.

Downside risks in the outlook for Primark is also a worry.

On the other side of the street, Dixons Retail attracted nosey buying amid vague talk of private equity interest and closed 0.19p up at 13.98p on turnover of 27m shares.

The recent profits warning, a fragile balance sheet and the fact that shareholders can now go and sing for a dividend has left the Currys and PC World chain vulnerable to a bid.

Post-Easter trading left a lot to be desired but the Footsie gained inspiration from across the Pond. It closed 51.06 points higher at 6069.36 after Wall Street jumped 115.49 points to 12,595.40 following an unexpected rise in US consumer confidence and better-than-expected earnings from bellwether firms, Ford, 3M and United Parcel Services.

Today, all eyes will be on the UK's first quarter GDP figure and Ben Bernanke and the Federal Reserve as the Federal Open Market Committee determines rates. Bernanke-will give a Press briefing soon after the decision is made.

International Airlines Group, formed by the merger of British Airways and Spanish airline Iberia, flew 9.9p higher to 229.6p after broker UBS said it is its top pick in the airline sector.

Softer metal prices led to profit taking in the mining sector. Randgold Resources shed 110p to 5195p, Anglo American 30p to 3132p and Vedanta Resources 14p to 2352p.

Celebrating its promotion from AIM and admission to the main market on the London Stock Exchange and appointment of Sir Richard Needham as a non-executive director, Lonrho added 1.5p at 18.5p.

Allergy Therapeutics rose 1.63p, or 12%, to 15.5p on news that the US Food & Drug Administration will lift the clinical hold on the company's investigational new drug applications for three of its allergy products, once the study protocols have been agreed.

Nomura Code remains bullish and says the company should be in a position to submit the first of the proposed study protocols before the end of June.

Blue collar recruiter Staffline climbed 16.5p to 195p as analysts gave the thumbs up to its £6m acquisition of FourStar Employment and Skills, one of the three preferred Work Programme providers for Birmingham, Solihull and the Black Country contract package area.

Active Energy, provider of energy saving technology to IKEA and Holiday Inn, soared 3.13p to 89% to 6.62p on acquisition news and the appointment of Gavin Little as chairman. He was previously chief executive of British American Tobacco in northern Europe.

AE has bought Red Line Engineering Services, an engineering services specialist, which Little obviously hopes will drive the company's move into broader environmental services.

The shock resignation of well-respected chief executive Nigel Brittle left non-life insurer Personal Group 2p cheaper at 271p. Panmure Gordon downgraded to sell from hold and cut its target price to 240p from 265p and said the company's reluctance to communicate any reason for Brittle's 'immediate' departure has created uncertainty.

North Sea oil and gas explorer Ithaca Energy gushed 3.5p to 158.75p following pleasing annual results. Revenues climbed to £82m, up from £24m last time. Boss Iain Mckendrick said that earnings of around £33m combined with a £91m fund-raising has strengthened the balance sheet. It now has £123m cash in the bank which will underpin the execution of the company's ongoing development projects, Athena and Stella.