Citi downgrades M&S, AB Foods; upgrades Dunelm

Citi reviewed its rating on a number of UK retail stocks on Wednesday amid a deteriorating economic outlook.

The bank cut Primark owner Associated British Foods and Marks & Spencer to ‘neutral’ from ‘buy’ but lifted homewares retailer Dunelm to ‘neutral’ from ‘sell’.

"Our analysis suggests limited liquidity risk with all companies having sufficient funds to last until trading is forecast to normalise in September," it said. "However, we believe that after a period of released pent-up demand, consumption will be held back by lower confidence and higher unemployment."

Citi said a V-shaped recovery in spending feels "too bullish". It reckons there will be a quicker recovery for younger consumers, but less so for older consumers and online penetration will take a "noticeable" step up.

"These trends do not favour M&S or Primark," it said.