The inauspicious start to 2008 underlines our view that the first half of the year will see a
period of prolonged market turmoil as investors attempt to second-guess prospects for
the major transatlantic economies
We expect sentiment in 2008 to get worse before it gets better given macro-led earnings
concerns, but consider certain niche propositions with defensive/non-cyclical growth
dynamics attractive following the recent sell-off
We initiate coverage on: N Brown, Overweight, target price 300p; Halfords,
Overweight, target price 350p; and Topps Tiles, Neutral, target price 155p

HSBC strategists retain an underweight view on the UK General
Retail sector. We expect sentiment in 2008 to get worse before it
gets better, given macro-led earnings concerns, but we consider
certain niche propositions with defensive/non-cyclical growth
dynamics attractive following the recent sell-off. We initiate coverage
on: N Brown, Overweight, target price: 300p (+18%); Halfords,
Overweight, target price: 350p (+30%); Topps Tiles, Neutral, target
price: 155p (+9%).

Negative sentiment prevails
While the UK Christmas out-turn on a company-by-company basis was better than the market expected,
given headline sector data from the British Retail Consortium (BRC) and Office of National Statistics
(ONS), it has done little to improve sentiment towards the retail sector. We believe negative sentiment
will prevail throughout 2008 as macroeconomic considerations dominate sector investment decisions and
will continue until there is some visibility on the bottom of the current interest rate-cycle, probably some
time in 2009. At this point we forecast a rotation back into cyclical stocks.
At present, the removal of private equity bid interest has led to a reversion to earnings rather than cashbased
valuation criteria, although a lack of yield support suggests the market has yet to gain comfort from
current forecasts. This has been accompanied by an increase in volatility on the back of misplaced bid
speculation and an increase in short-sell/squeeze activity. However, in our opinion, the indiscriminate
nature of the recent sell-off has led to some specialist defensive retail propositions becoming attractive –
and these warrant a closer look. We initiate coverage on: N Brown (BWNG.L), Overweight, target price:
300p (+18%); Halfords (HFD.L), Overweight, target price: 350p (+30%); Topps Tiles (TPT.L), Neutral,
target price: 155p (+9%).

目录

Investment strategy 3
Sector commentary 9
Key economic factors 23
Company profiles 29
N Brown 30
Halfords 52
Topps Tiles 72
Disclosure appendix 92
Disclaimer 95