Market Report: Buyers pick Monsoon as it weathers retail storms

MONSOON APPEARED on several buyers' shopping lists yesterday amid rumours that the clothes chain is weathering the soggy retail market.

As the major indices soared to new all-time highs, the stock rose 2.5p to 61p before closing unchanged at 58.5p.

Monsoon's performance did not exactly take the market by storm, but a several knowledgeable dealers are keen on the company. The rumours coming from the high street suggest that Monsoon, and its earrings and necklaces spin-off Accesorize are doing better than most. Unlike many of its rivals, the company is not discounting any of its clothes - apart from the millennium party wear - and is netting some pretty juicy margins on its sales. On a like-for-like basis, turnover is said to be marginally higher than last year and above the sales of most of its peers.

This fairly bullish picture should be confirmed in the Christmas trading update in a few weeks and could be reflected in the finals due out in February. According to Seymour Pierce retail analyst Richard Ratner, Monsoon should raise pre-tax profits from last year's pounds 20.4m to pounds 23.5m and pay a dividend of 4.5p.

Shopoholic dealers believe that Monsoon's goodish performance is being shared by a few clothes chains such as Next, 38p better to 575p and Oasis, flat at 135.5p.

Sports retailers like JJB Sports, unchanged at 552.5p and JD Sport, flat at 147.5p, are also thought to be faring well.

However, the rest of the sector is having an horrific Christmas as penny- pinching customers force price cuts and squeeze margins. Middle-market retailers like Arcadia, up 2p at 81p, Debenhams, up 3p to 170p and Storehouse, up 4p to 45p, are said to be experiencing a sales bloodbath and their share price rises are mainly due to the ever-present bid whispers.

The computer games chain Electronics Boutique, down 0.25p to 36p, is also having a tough time and Mr Ratner has slashed its profit prediction from pounds 13m to pounds 9m, compared with pounds 15m in 1998.

The rest of the market got into the Christmas spirit with a record-breaking rally. The FTSE 100 exploited the thin trading conditions and an astonishing opening rise in the Dow to close 48.2 up to 6776.8 in its last full day before Christmas. In the process, the leading index smashed its intra- day peak, jumping 74.5 to 6803.1.

Unlike the blue-chip index, the undercard has been setting new records for a while and yesterday was just another day in its triumphal run. The FTSE 250 ended 15.8 higher to 6378.7, while the SmallCap moved 10.4 up to 3052.3.

With volume a skeletal 590 million shares, a few big movements made the difference.

Among blue chips, the heavyweight financials, telecom and pharmaceutical sectors were all in good form. Insurer Prudential soared 59p to a best- ever 1,165p on a hat-trick of rumours. First up was the talk that the Pru might receive an approach from a US or European giant. Secondly, there were renewed whispers of a new year float of the insurer's web bank Egg. And finally, a few investors were raving about the Pru's recent entry into the Chinese market. Bid talk lifted Bank of Scotland 20p higher to 709.5p. If its bid for NatWest, up 5p to 1299p, fails a takeover of BoS is seen as a real possibility.

Telecoms continued to be the bee's knees. Sector giant Vodafone AirTouch rang up a 9p rise to 305.75p after officially launching its mega bid for Mannesmann amid growing rumours that it will win the day. Colt, up 91p to a record 3,109p and Energis, 9p higher to 2,988p, were excited by the usual bid rumours.

Drugs were also administered a dose of takeover talk, with Glaxo Wellcome, 29p better at 1,669p and SmithKline Beecham, 11.5p higher to 771p, boosted by renewed whispers that merger negotiations are back on. Smaller rivals Shire Pharmaceuticals, up 30.5p to 646p and CeNeS, 6.5p higher to 53p, were boosted by talk of imminent licensing deals. The mail order group GUS joined the fun, rising 20p to 362p on continued whispers that a US takeover is nigh. Hilton Group rebounded 6.75p to 201p, also on speculation of a US tie-up.

Tech stocks had a mixed day despite another vertical rise by Nasdaq. Software group Misys, 61.5p better to a best-ever 945.5p on whispers of new deals, TV decoder maker Pace Micro, up 30p to 520p and mini-computer manufacturer Psion, 101p higher to 2,499p, followed their US peers.

However, high-fliers ARM Holdings, down 200p to 3,739p despite being included in NatWest's stock picks for 2000, Sage, down 44p to 725.5p, and midcapper QXL.com, down a hefty 120p to 1,547.5p, were hammered by profit-takers.

In the midcap, aerospace group Smiths Industries flew 55p higher to 931p on whispers of new US deals, while renewed bid talk pushed United Assurance 13p higher to 318p.

Security group Securicor, an old bid chestnut, firmed 1p to 166.25p despite some large selling by an institutional shareholder. Growing takeover gossip helped water group Severn Trent to flow 26.5p higher to 609p, but fading hopes of a bid in the near-term wounded supermarket group Somerfield, 6.25p lower to 88.25p and chemical group Laporte, 30p down to 540p.

As usual, there was no stopping some of the tiddlers. Publisher MediaKey jumped 11p to a yearly peak of 30p as the ubiquitous Luke Johnson jumped on board and former Monty Python John Cleese left the company.

Internet investor Jelly Works, floated at 5p on Tuesday, rocketed 26.5p to 91p - an 18-fold rise in two days. Rivals netvest.com, up 87.5p to 430p and Internet Indirect, up 15p to 59.5p, followed the trend.

Investment vehicle Culver jumped 35p to 582.5p after announcing pounds 5.2m fund raising at 120p-per-share for its travel website worldtraveldirect.com. It also announced that it has regulatory clearance to demerge the business, probably in the first quarter of next year.

Willisham, the old Sentry Farming, ploughed 21p higher to 72.5p after revealing a number of reverse takeover approaches, while healthcare group Medical Solutions firmed 3.75p to 30.5p ahead of an expected acquisition.

SEAQ VOLUME: 590.5m

SEAQ TRADES: 68,932

GILTS INDEX: N/A

f.guerrera@independent.co.uk

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