Mixed markets, AG Barr soaked by the rain, and Burberry’s new collection is a hit

“European markets were mixed on Tuesday with the FTSE 100 rising 0.1% to 7,540, Germany’s DAX index showing a similar advance and Amsterdam’s AEX index slipping 0.2%. “Asian shares also struggled to find direction with Hong Kong’s Hang Seng rising 0.1% and Tokyo’s Nikkei 225 falling 0.7%. UK stocks were led by Burberry, ITV and Pearson,” says Russ Mould, Investment Director at AJ Bell.

AG Barr

“A profit warning from AG Barr shouldn’t have been a surprise given this summer’s extreme weather patterns, namely the horrible rain in June. If the sun isn’t shining then you’re less likely to want to quench your thirst with a cold drink from the shop.

“One can excuse the drinks company for not selling as many products in these conditions, however specific brand challenges with Rockstar and Rubicon are slightly concerning.

“Management appear to have addressed the issues with a mixture of new product development and recipe improvements, however we won’t see the benefit of these actions until later this year or early 2020.

“AG Barr has a good reputation of being able to deal with challenges such as the sugar tax where it had to reformulate its products.

“It is generally good at keeping up with changing consumer tastes, as illustrated by plans to launch an Irn-Bru energy drink this summer and the recent debut of its Funkin canned cocktails. It has also made an investment in alcohol-free adults drinks firm Elegantly Spirited.

“The ability to manage constant moving parts and have fairly resilient earnings shows that management are good at their job.

“Irn-Bru has a reputation of being the drink of choice for many people nursing a hangover and so investors’ headache may not be long-lasting if they stick with the drinks manufacturer.

“One also has to think that the current sunny weather plays to AG Barr’s favour and so it may not be in a sticky patch for too long.”

Burberry

“It’s been a while since Burberry has had some really good news and we’ve now got some. First quarter sales are better than expected thanks to a positive customer response to a new collection by chief designer Riccardo Tisci, as well as decent business in Asia.

“While the business is understandably pleased about the quarter, fashion can be a fickle industry and so Burberry still faces the risk that consumer tastes suddenly shift in favour of a different fashion seller.

“The future lies in improving pricing, making sure costs don’t get out of control, improving stores and making sure new collections have long-lasting appeal. The turnaround story still has a long way to go and one positive quarter is not a reason to declare the business fixed.”

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