Profits warning causes retail stocks to fall in London

Retail stocks tumbled sharply today after electricals retailer Dixons issued a shock profits warning.

Disappointing Christmas sales at the group, which also owns Currys and PC World, meant shares lost a fifth of their value and pulled down the whole sector.

The falls dragged on the market and by the close of trading the FTSE 100 Index was 32.6 points lower at 3924.8.

A tough start to trading in the US also hurt the mood. Wall Street slid on its opening after a profits warning from computer maker Gateway rattled the market.

Many investors were also ignoring George W Bush’s headline-grabbing tax break announcement in the US last night.

Martin Dobson, head dealer at NatWest Stockbrokers, said: “People are saying the tax breaks are targeting investors rather than industry and the Footsie is still largely on a negative tack.”

In London the biggest story was worries of sluggish retail spending after Dixons’ shock warning.

Dixons topped the fallers’ board, down 30.5p at 116.5p, while Kingfisher, home to B&Q and Comet, fell 16.75p to 197.75p, Argos-owner GUS dived 25p to 551p, Boots fell 20p to 572p and Marks & Spencer was down 12.5p at 310.5p.

Second-tier stocks also took a hammering, with Carphone Warehouse down 5.5p to 73.5p, Woolworths off 2p at 32p, HMV 4.5p lower at 113p and Debenhams off 10.25p at 268p.

But it was not all bad news in the retail sector after blue chip clothing chain Next posted resilient sales figures and stuck by full-year forecasts.

While like-for-like growth of 1.7% in the 23 weeks to January 4 was far from spectacular, shares lifted nearly 3%, or 24p, to 770p.

But elsewhere, insurance stocks come under further pressure following Monday’s damaging profits warning from FTSE 250-stock Britannic.

The shockwaves continued to affect its blue-chip rivals with Prudential down 8p to 423p and Aviva off 15p at 435.5p.

Others on the slide included Friends Provident, down 8.75p at 106.25p and Royal & Sun Alliance, off 8.75p at 117.25p.

Britannic, which slumped 50% on Monday after pulling its dividend and annual bonus for policyholders, edged up 0.5p at 172p.

Another riser was fellow FTSE 250 firm Waste Recycling Group, up 29% after saying it was in takeover talks.

The waste disposal firm, in which water group Kelda has a 46% stake, surged to the top of the FTSE 250 leaderboard, up 64p at 285p.

And the gains helped to pull up rival Shanks, which climbed almost 19% to its highest level since September – ahead 19.5p at 122.5p.

Among other stocks, budget airline easyJet failed to get a lift from figures showing a 40% rise in December passenger numbers. Shares fell 12p to 273p on concerns over empty seats after figures showed a slip in load factor.

The biggest Footsie risers were Next up 24p a 770p, Compass up 10p at 330p, Alliance Unichem up 14p at 476p, GlaxoSmithKline up 32p at 1229p and Alliance & Leicester up 15.5p at 754p.25p.

Fallers were Dixons down 30.5p at 116.5p, Kingfisher down 16.75p at 197.75p, Friends Provident down 8.75p at 106.25p, Royal & Sun Alliance down 8.75p at 117.25p and Invensys down 3.5p at 52.75p.