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“The FTSE 100 seems stuck in a holding pattern amid radio silence on the next move in the US-China trade negotiations. Having moved higher amid some optimism on this front early in the week, investors now seem to be awaiting solid news one way or another.
“It may hinge on whether the US is prepared to dial back some of the tariffs on Chinese goods,” says AJ Bell Investment Director Russ Mould.
Marks and Spencer
“The disappointments are piling up for Marks & Spencer like unsold sweaters and cardigans on its shelves.
“Fresh from the surprise departure of its finance chief and its relegation from the FTSE 100 for the first time in September, the company has served up a mixed set of first half results.
“The theme is broadly the same as it has been for years, food has done well but the clothing and home business is struggling – although a combination of low expectations and slightly improved recent trading helped give a bombed out share price a bit of a lift.
“The company has already admitted it is well behind with its turnaround of this part of the business, reflected in the decision to fire its head Jill McDonald in July. CEO Steve Rowe has rolled up his sleeves to take more direct control with the apparent attitude that if you need a job doing properly you should do it yourself.
“Unlike more successful retailers like Next, online sales are not coming to the rescue for Marks and are growing at a very modest rate. This undermines the credibility of its ‘digital first’ strategy and plan to close a large number of physical stores.
“The cut to the dividend had been widely trailed but may still frustrate shareholders, with the wisdom of this decision set to be tested by the success or failure of its capital-intensive online food delivery venture with Ocado next year.
“If food becomes increasingly successful, there may be pressure for the company to separate the two parts of the business.”
Intu Properties
“Company Voluntary Arrangements, or CVAs for short, remain the bane of shopping centre owners like Intu’s existence.
“These vehicles allow struggling retailers breathing space to sort out their problems, close underperforming stores and cut their rent bills but this comes at an obvious price for landlords.
“Never mind running to stand still, Intu is running to go backwards. Despite efforts to sort out the business and a strained balance sheet, including the decision to cancel the dividend, the company continues to see rental income fall.
“This is being driven by the difficult environment facing its tenants – reflected in a rising number of CVAs including at Arcadia and Monsoon. And amid all these swirling pressures the company has admitted it may need to go cap in hand to shareholders for more funds.
“At least the company is starting to see some improvement in footfall and letting activity. It will hope a fragile recovery here isn’t derailed by the timing of a UK General Election smack in the middle of the traditional festive shopping season.”
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