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“The US Federal Reserve has left investors confused. Last night’s rate cut was widely expected but the market doesn’t know what to think about split views in the Fed as policymakers in the committee failed to agree on economic conditions,” says Russ Mould, Investment Director at AJ Bell.
“US markets barely moved last night and today we’ve got a slight dip in the FTSE 100 and a marginally worse drop in parts of Asia.
“The Bank of England isn’t expected to deliver any surprises when its latest interest rate decision is unveiled later on Thursday, most likely there will be no change to rates. Leading up to that event, the pound was flat against the dollar and the UK-focused FTSE 250 index was also unmoved.
“On a sector basis, the UK market saw weakness in some utility stocks and miners while banks were back in fashion."
Next
“There is always a sense of trepidation when retailers publish financial results for fear they will be bearers of bad news. Next flags a weak start to the autumn season but reassuringly says there is no change to its earnings guidance. Alas that isn’t enough to keep the market happy which explains why the shares have fallen on the news.
“We’re now heading into a very important season for Next as the switch from the summer to colder weather typically acts as a sales catalyst with customers stocking up on jumpers and coats. Next, alongside many other retailers, will be keeping its fingers crossed that sales pick up and also that Brexit doesn’t cause a spike in inflation and logistical problems at ports.
“In the grander scheme of things, Next is managing to cope quite well with the structural challenges facing the retail sector.
Online is the key growth driver for Next’s earnings but the physical store will still play an important role. Half of all online orders are delivered to stores for customer collection and so Next is committed to keeping a presence on the high street. Fortunately rents are falling and it has a plan to slim down the number of stores so there is still an opportunity to further streamline the business.
“The decision to sell third party brands is also proof that Next’s management have an open mind on how the business should be run. They see an opportunity and value to customers in having a platform that aggregates hundreds of third party brands alongside Next’s own products.
“While selling other company’s goods may result in lower profit margins, it does allow Next to get more out of its distribution network. And unlike many other marketplaces, Next has control over the process, feeding third party products into its warehouse, consolidating orders into a single delivery which reduces costs, and it has visibility over where each parcel is going.”
Saga
“Over 50s travel and insurance business Saga had a compelling tale to tell when it joined the stock market in 2014. It enjoyed a strong brand and was serving a growing demographic.
“However, the company has really struggled to execute on the opportunity in front of it, beset, in particular, by problems in its insurance arm.
“One issue for Saga is that its customers are increasingly savvy and will look beyond the company both when insuring their car or their home and when booking specialist holidays if they think they can get a better deal elsewhere.
“In order to boost retention rates the company announced a change of approach in April. This included the introduction of home and motor products with fresh benefits such as a three-year fixed price.
“This has hit earnings in the short term. Combined with weak demand for holidays, amid the uncertainty around Brexit, and it is little surprise that profit has halved.
“The fact the market already had low expectations, plus signs of decent sales for its fixed price insurance offerings, helps explain the positive reaction to today’s numbers.
“Still, if this is what ‘good progress’ looks like according to CEO Lance Batchelor, investors must dread to think what weak progress might mean.
“Steering Saga back on course will soon be someone else’s problem as Batchelor prepares to stand down in January. His successor faces a tough task.”
These articles are for information purposes only and are not a personal recommendation or advice.