Dixons Carphone shares lead 8216 toppy 8217 retail sector

The UK stock market’s indecisive mood this week has been well reflected by large moves and volumes of high-profile retail shares.

On Wednesday, mobile and tablet store chain Dixons Carphone traded choppily in high volume after it said in its final quarterly update of 2014 it expected full-year results to be at the top end of expectations.

Shares of bookstore-to-newsagent and high street ‘convenience’ retailer WH Smith also had a standout session, briefly topping the FTSE 250 mid-cap index after it released a “confident” interim statement.

For the retail sector, it strongly appears that consumption, including retail sales, which surged more strongly than expected in April, is buttressing major UK consumer-related firms, preventing the significant FTSE retail sector declines seen last year.

Shoppers, encouraged by the combination of inflation and interest rates at multi-year lows in the last few months, are hitting the high street, and this is feeding into the shares of well-known retail names.

Reuters’ UK Retailers Index is a tad over 31% higher since October, far and away the best performer among the FTSE 100, the FTSE’ All-Share Index and the FTSE 250 mid-cap gauge.

However there has been more than a touch of ambivalence in the sector this week.

Some of this was company-specific.

AO World, a closely-watched Internet-based start-up focusing on large consumer appliances – ‘white goods’– failed to recapture its ‘growth-stock’ status after releasing an interim report on Tuesday that suggested it faced years of weak operating earnings, due to a costly roll-out in Europe.

AO’s world had collapsed by about 50% in the space of fortnight in February – at least its share price did.

The firm claimed it had been the “victim” of an overhyped float in 2014 and subsequently downgraded full-year profit forecasts.

Its chairman, Richard Rose, selling 89% of his shares in April didn’t help investor confidence in its ability to scale fast enough to meet fierce competition in the electrical appliances segment.

Even shares of its established high street retail peer Dixons Carphone, reflected investor ambivalence on Wednesday.

Having traded 2.3% higher earlier in the session, Dixons reversed course and ended the day lower.

That’s despite the fact that it smashed quarterly trading expectations, particularly in the UK, where both its ‘electrical’ and mobile goods sold strongly, gaining DC some market share.

Perhaps even all these wins were not enough to dispel market wariness after the stellar 40% run of DC’s stock since October, that enabled the shares to touch all-time highs above 490p during Wednesday’s session.

The challenging comparable share-price basis seemed to mirror comments by Dixons Carphone’s Finance Director, who to told reporters that comparative sales figures would be much tougher to match in the first quarter of its 2015-16 year than in the same period during the year before.

The 2014 financial year had been boosted by additional purchases related to the World Cup, Dixons said.

There’s no denying the strong aspects of Dixons’ stock price chart, though in the next few trading days, DC stock bulls will need to keep it from slipping below 466p-459p support to ensure it remains out of the range of a clear falling channel.