Bullish presentation on clothing sales gives Tesco a boost

Shares in the supermarket giant Tesco received a boost yesterday as word from the group's Manchester analyst's visit got back to traders in the Square Mile. Tesco completed a second day of presentations to sector specialists yesterday, in which it tried to convince them that the stock market is underestimating the group's potential. It seemed to do the trick, as the stock gained 4.75p to 214.75.

Tesco, which has opened new stores in the Manchester area and now finds itself as a strong number two to rival Asda, is believed to have shown off its achievements in the region to those present and, more importantly, indicated that sales of clothing at its stores have been very strong of late.

Word has is that sales are up by 40 per cent. Tesco over the past five years has been busy trying to grow non-food sales and has been successful. They have rise from £2.7bn in 1997 to around £6bn today. In particular the supermarket giant has invested in its clothing section, where it aims to undercut the high street on price but match it on quality. If feedback from yesterday's meeting in Manchester proves to be correct this strategy is paying off in a big way for the company.

Dresdner Kleinwort Wasserstein, who's analysts attended Tesco's presentations in Manchester, described developments at the group's stores as "industry leading" but warned that uncertainty surrounding the Competition Commission's investigation into the takeover of rival Safeway are likely to hold back Tesco shares in the near future.

In the FTSE 100 index, which finished 29.3 points higher at 4,058.1, Hilton fell 2.75p to 193.5p after Merrill Lynch was heard urging its clients to close their bull positions. The move by the US broker should not surprise investors. Over the past four months Hilton shares have soared by 45 per cent. Merrill also downed its 2003 pre-tax profit forecast for the hotels group to £243m from £258m to account for the lingering effects of the Sars virus, among other things.

BPB, the world's biggest maker of plasterboard, dropped 14.25p to 316.75p on worries that it is having trouble raising prices for its products in the US. McCarthy & Stone shares took a pasting, falling 63p to 457p, as John McCarthy, the housebuilder's founder and current chairman, said he was no longer interested in taking the group private. Mr McCarthy seemed to indicate that he viewed the group's shares as overvalued and warned investors that "the housing market is undoubtedly weakening".

Talk that next week's trading statement from Matalan will be upbeat failed to excite the stock, which finished the day flat at 181.5p. Staffware jumped 27.5p to 485p as Arbuthnot Securities was heard to have hosted a bullish meeting with institutional investors for the software group.

City Centre Restaurants ticked 0.25p higher to 69.5p after Evolution Beeson Gregory came away from a meeting with the group's management team in a bullish mood. "It appears that the strong turnaround that the company has effected over the past two to three years is continuing into the first half of the current year", Evolution told clients. CCR's management is also believed to have indicated that the war in Iraq and the Sars virus have had little impact on trading.

Intermediate Capital Group, which helps finance management buyouts, dropped 4.5p to 1,000.5p after Merrill Lynch downgraded to "neutral" from "buy". The US broker reckons ICG's valuation is simply too high at present to justify a "buy" rating. Shareholders, however, cannot grumble. ICG shares have risen by nearly 60 per cent over the past 12 months.

Lower down the pecking order, Yorkshire Group fell 0.88p to 8.87p after raising £400,000 via the sale of property in the US. JKX Oil & Gas gained 1p to a year high of 30.5p on hopes for the group's oil fields in the Ukraine. According to market gossips, the company will soon unveil a positive drilling update, which some believe could see it boast of a doubling of its oil reserves thanks to the exploitation of its assets in the Ukraine.

PM Group, which provides software services to the waste management industry, was unchanged at 145p despite the sale of 35,000 shares at 144p by Geoffrey Mountain, the chief executive. The company was keen to note that the disposal accounts for a small part of Mr Mountain's total holding in the company.

Meanwhile, Medical Solutions rose 1.5p to 24p as it disclosed that Karol Sikora, the firm's Scientific director, had purchased 215,000 shares at 23p. Earlier this week Medical Solutions held a meeting with Evolution Beeson Gregory. Following the tête-à-tête, Evolution said: "[The meeting] has increased our confidence in the company's ability to deliver on its aim of being a key supplier of pathology services to the NHS and the pharmaceutical industry."