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“A sense of calm can be felt on the markets today with the FTSE 100 nudging up 0.3% to 7,324. Screens are also flashing green across Continental Europe and Asia. Miners, banks, housebuilders and construction companies all enjoy share price gains on the London market, with the only real area of weakness being utilities,” says Russ Mould, Investment Director at AJ Bell.
Supermarkets: Sainsbury’s and Tesco
“Sainsbury’s chief executive Mike Coupe’s on-camera ‘We’re in the Money’ moment after a merger was announced with Asda back in the spring may not just have been an embarrassing gaffe but also somewhat premature.
“This morning, following an initial review of the deal, the Competition and Markets Authority says the tie-up has raised sufficient concerns over the impact on consumers to face an in-depth probe. A deadline of March 2019 has been set to complete this stage of the investigation.
“Ultimately the risk is the combination could be blocked or given the go ahead with such onerous conditions, such as selling lots of stores for example, that it would begin to undermine the whole rationale for the merger.
“Perhaps more likely the transaction will eventually get signed off but will have been sufficiently protracted to distract management from the task of navigating a fast-moving and highly competitive groceries market.
“In this vein, rival Tesco is poised to unveil its new Jack’s chain of discount stores in Cambridgeshire today as part of an effort to bat off the threat posed by German discounters Lidl and Aldi.
“Tesco has already bolstered its position with the acquisition of Booker and is now ready for the next part of its evolution. At the moment it is streets ahead of Sainsbury’s, both in market share terms and strategically in the fight of the supermarkets. And any major setback to the Sainsbury’s/Asda deal would certainly give Tesco another boost.”
Kingfisher
“Shares in Kingfisher are now trading at a six-year low as the DIY group’s transformation programme is clearly not working.
“Poor financial results are happening too often with this business and it seems odd that chief executive Veronique Laury has managed to hold on to her job. In similar situations, the CEO would normally be shown the door when performance is consistently bad.
“The supply chain boss Arja Taaveniku is leaving after three years in the role, so one could suggest the wheels are in motion for senior leadership to take the fall for underperformance. Laury is living on borrowed time and must surely be shown the door next if business doesn’t improve.
“Kingfisher looks like a classic target for an activist investor with analysts already suggesting the business could be worth a lot more it is broken up. That might explain why so many analysts have ‘buy’ ratings on the stock.
“The business has a £99m net cash position, £3.76bn worth of property and equipment, and numerous operations in different countries that could easily be separated.”
These articles are for information purposes only and are not a personal recommendation or advice.