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"Markets across Europe and Asia tripped up on Thursday after a rise in US Treasury yields to levels not seen since 2011. The Treasury yield is commonly seen as the risk-free rate for investing, so an increase tends to be negative for other asset classes including shares. "A higher oil price lifted Royal Dutch Shell and BP, which are among the top risers on the FTSE 100. Laggards on the blue-chip index included British American Tobacco and media group WPP which traded ex-dividend," says Russ Mould, Investment Director at AJ Bell.
Ted Baker
“Ted Baker positions itself as affordable luxury and has a good track record of being a fairly resilient business. Sadly market conditions are acting as a major headwind which is reflected in its latest half year results.
“A mere 1.1% rise in retail sales is fine if you are comparing its performance against the large number of retailers who are struggling on the market, yet it isn’t enough for a business in general when you consider the need to offset wage, energy and raw material inflation in general.
“Fortunately, Ted Baker has additional interests such as licence income and a wholesale operation, so overall group revenue growth of 3.5% is a tad better, although pales in comparison to the pace of growth for many online-only fashion retailers.
“And 3.5% revenue growth isn’t that strong given Ted’s brand strength and global reach, representing a slowdown from the 4.2% growth seen in the first 19 weeks of the year.
“Retail gross margins are falling because it has to spend more money on promotional activity to help shift goods in a more difficult market environment. Ted’s management will no doubt do everything they can to avoid discounting goods too much as one of the worst things to do is get sucked into a spiral of continual cuts so customers begin to expect much cheaper prices forever.
“The one area that provides some comfort is the online channel where sales increased by 24.1%. Expanding e-commerce activities is very important to Ted’s future, just as it is for nearly all retailers.”
DFS
“We Brits love a grumble about the weather and plenty of UK PLCs have got in on the act in 2018 blaming either the very wintry conditions at the start of the year or the summer heatwave for poor trading.
“The near-50% decline in full year profit at sofa shop DFS is largely attributed to the hot weather putting off customers over key trading weekends.
“But hang on, rival ScS recently reported a double-digit advance in its own full year pre-tax profit – do their stores have some kind of unique micro-climate?
“In fairness ScS did endure some sales pressure from the sunshine but the notably weaker performance from DFS suggests other factors are also playing a part.
“Notably shipments of made-to-order products from Asia were hit by problems at Felixstowe port. Chief executive Ian Filby provides little comfort for investors ahead of his planned departure at the end of this month, saying a recent pick-up in trading is likely to reflect deferred purchases and pointing to a ‘subdued’ market.”
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