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“The FTSE 100 should today close at a record high for 2019 if it can sustain the momentum seen in early trading on Tuesday. Propping up the index are various blue chip companies which have large US dollar earnings including InterContinental Hotels, Ashtead and Antofagasta as the US dollar has increased by 0.2% against the pound,” says Russ Mould, Investment Director at AJ Bell.
JD Sports Fashion
“JD is living proof that parts of the retail sector is alive and well. Sales continue to soar as it has found the perfect ingredients to keep the tills ringing.
“It is engaging with customers by offering exclusive products and staying abreast of constantly changing fashion trends. It is also recognising the hard work of staff and giving them interesting career development opportunities thanks to its increasing global scale.
“The acquisition of Finish Line opens the doors to the US market which is the largest market for sport lifestyle footwear and apparel. It also provides an opportunity to export JD’s formula so that it can improve Finish Line’s profits.
“However, you mustn’t forget the big infrastructure issue that hangs over all fast-growth retail businesses. They need to invest heavily in warehouse capacity in order to fulfil orders and this work doesn’t always go smoothly, as the likes of ASOS and others have found out.
“JD is extending its Kingsway warehouse and flags disruption to operations which it says could continue across the first-half of its current financial year. This is an area to watch as JD doesn’t want to get into the situation where it cannot meet demand.”
Galliford Try
“Can you even make a profit at construction anymore? Always a fairly low margin activity, the number of disappointments from this industry just continues to build up.
“Today’s big profit warning from Galliford Try just adds to a wider negative trend which has seen one constituent go bust in Carillion and others such as Kier see their share prices collapse and balance sheets come under significant pressure.
“Cut throat competition in the sector resulted in a lack of discipline and low-ball bids for contracts which made turning a profit nearly impossible.
“Galliford appears to be acknowledging the need for a more disciplined approach with its plan to scale back its construction arm – which faces spiralling costs on some projects particularly the Queensferry Crossing joint venture.
“Shareholders are entitled to be somewhat disturbed by the fact that as recently as February it was happily expressing its confidence in full year guidance.
“At least Galliford is taking its medicine now with the aim of enjoying a healthier future, underpinned by its higher return regeneration and housebuilding businesses.”
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