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“The FTSE 100 showed little sign of recovering the ground it lost last week in early trading as investors digested the latest political instability in Europe and as trade tensions continue to simmer away in the background,” says AJ Bell Investment Director Russ Mould.
Associated British Foods
“Investors may be getting worried about the ongoing ability of Associated British Food’s Primark business to get the rest of the company out of trouble. “Amid a warning of a £20m currency hit to full year profit from currency movements and of lower operating cash flow the company left its full year guidance unchanged in terms of its adjusted performance – stripping out the impact from foreign exchange.
“The main fly in the ointment is the sugar division which is being hit by the pressure on prices in the European Union which currently enjoys a supply glut.
“Budget clothing retailer Primark continues to do well and appears to be a beneficiary of shoppers trading down with sales in the UK up 1.5% on a year-on-year.
“However, it may be asking too much for this part of the business to always come to the rescue given the pressures on traditional retail.
“And the relatively downbeat guidance for this part of the group confirms this point.”
Debenhams
“The market is clearly taking seriously widespread reports that department store Debenhams has called in administrators KMPG to consider its options.
“This apparently includes a company voluntary arrangement (CVA) allowing it some breathing space to restructure its liabilities.
“The company has already warned on profit three times in 2018 and announced plans for a series of job cuts.
“The struggles at Debenhams follow the collapse of rival House of Fraser into administration over the summer and another thing both have in common is a material presence on the shareholder register for Mike Ashley’s Sports Direct.
“Speculation that he might launch a bid for Debenhams after capturing House of Fraser in August is likely to follow.”
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