Last updated: July 7, 2014 6:15 pm

Debenhams retreats as Ashley eyes decline

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How long now before Debenhams gains an unwanted shareholder?

Fears of poor trading sent Debenhams to its lowest since January 2012 on Monday, down 2.9 per cent to 66.2p.

Kantar data showed general merchandise sales for the department store rose just 0.5 per cent over the second quarter, against 5 per cent market growth.

The weak performance will have been noted by Mike Ashley’s Sports Direct, which holds a so-called put option for a 6.6 per cent stake in Debenhams that will trigger if the stock falls below an undisclosed level.

Since Sports Direct agreed the contract in January, Debenhams shares have dropped 19.2 per cent.

Debenhams last month agreed to trial Sports Direct concessions by giving the brand the whole top floor at two of its stores.

Given Debenhams currently sits on about 1m square feet of unproductive space, analysts expect a similar format to be rolled out nationally next year.

A wider market pullback left the FTSE 100 lower by 0.6 per cent to 6,823.51, a fall of 42.54 points.

Leading the blue-chip fallers, Tullow Oil lost 3.1 per cent to 817.5p after violence flared near its Albertine rift basin prospect in western Uganda.

A sell-off among recent flotations continued with AO World off 7.5 per cent to 246p and Pets at Home down 5.9 per cent to 184p.

Respectively, the stocks have lost 13.5 per cent and 25.1 per cent since joining the London market.

But Poundland rallied 1.5 per cent to 343p as brokers including Shore Capital stayed positive post its maiden full-year results last week.

BSkyB edged 0.2 per cent lower at 901p after Nomura slashed earnings forecasts for Sky Deutschland.

Sky will be paying more than 300 times 2016 earnings including synergies if it pays €6.7bn to take control of its German and Italian sister companies, said the broker.

Weir Group was up 0.7 per cent to £27.35 after Citigroup added the fracking pumpmaker to its “buy” list.

“Weir deserves a premium rating to the sector to reflect positive exposure to structural trends in oil and gas, further earnings upgrade potential and improving returns,” Citi said.

“Rising US fracking service intensity should drive equipment replacement and comments from oil services names indicate scope for earnings upgrades over 12 to 24 months, with interim results a potential positive catalyst.”

Russian gold miner Petropavlovsk bounced 27.8 per cent to 42.5p after responding to a slump in its shares by saying it was on budget and on track to meet production guidance for 2014.

The stock had earlier been down as much as 6 per cent amid worries that Petropavlovsk might need a cash call to stay within its debt covenants and repay $310.5m of convertible bonds due next year.

Sirius Minerals lost 7.8 per cent to 11.8p after the UK potash mine developer said it would not be submitting final documentation until the end of September, a delay of two months.

“Based on the comments by the National Park authorities, it would appear that the company has still got quite a lot to demonstrate before changing the trade-off in their favour,” said SP Angel. “With the UK economy now in a stronger position, we wonder if the case for job creation has been pushed back.”

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