Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
“The pound has continued its rally ahead of the general election, now trading at $1.3145 which is a seven month high. Unfortunately the currency’s strength is not giving a lift to the UK domestic-facing FTSE 250 which slips 0.1% to 20,638. The index was being dragged down by various transport, mining and financial stocks.
“Strength in the pound is typically bad for the FTSE 100 index which is dominated by overseas earners. It falls 0.3% to 7,165 with financials, retail and utilities among the key sectors out of favour with investors,” says Russ Mould, Investment Director at AJ Bell.
Dunelm
“A lot can happen in two months in the world of retail and in Dunelm’s case the winds have changed in its favour.
“A trading update in October was mixed with fairly lacklustre sales growth following a much stronger period earlier this year. That may have simply been a blip with the homewares seller now much more upbeat, although it doesn’t provide any sales figures.
“Key to its latest bullish trading update is a good customer response to its new website. That’s going to be a huge relief to the company as there is always a fear that new IT projects won’t work properly on initial deployment.
“Also in its favour is an improvement in margin which has to be commended given how the general direction of travel for retailers is margin compression in a world of heavy discounting.
“Last year Dunelm had a very strong festive period with 9% like-for-like sales growth in the 13 weeks to 29 December. The management team has historically been very cautious with regards to predicting earnings which helps to keep expectations from getting too high.
“No-one knows how the general election result will impact consumer spending patterns and so the company has understandably avoided giving too bullish a comment about its outlook.”
DS Smith
“It may have been neatly packaged up in an apparently robust set of first half results from DS Smith but investors haven’t missed the fact that organic volume growth for its corrugated boxes is below target and pricing is under pressure.
“The company argues it has achieved a better performance than the wider market, but even if this is the case it is hardly a reason for investors to get excited.
“The growth of e-commerce, which requires boxes to send goods out to consumers, saw market sentiment towards packaging companies reach fairly elevated levels for a while, but today’s update from DS Smith adds to signs that the growth story is losing momentum.
“Acquisitions account for much of the rise in profit reported this morning. Here there is some disappointment with the recently-purchased Europac business making a weaker than expected contribution.
“The company remains upbeat on the outlook for future demand, driven by online retail and demand for the sustainable packaging it specialises in, yet second half performance is likely to be under some scrutiny.
“The sale of its plastics division is expected to complete at the end of the year which should help the company pay down debt.”
These articles are for information purposes only and are not a personal recommendation or advice.