Markets await US/China agreement, Games Workshop still winning at retail, and Boohoo is still on a roll

“Mining stocks were in demand on Tuesday after China’s exports rose for the first time in five months in December and investors eagerly awaited the signing of a preliminary trade agreement between the US and China, expected tomorrow (15 Jan).

“London-listed utility stocks extended yesterday’s gains with Centrica and United Utilities both among the best performing FTSE 100 stocks.

“Among the mid-caps, chemicals group Elementis took a big hit on the stock market after reporting subdued trading. The market will now be worried about its relatively high levels of net debt relative to earnings. Indeed, the company said financial deleveraging is a key focus,” says Russ Mould, Investment Director at AJ Bell.

Games Workshop

“Who would have thought trolls and goblins were the key ingredient to retail success? Forget celebrity endorsements and Instagram follower numbers, carving out a market niche and excelling at good old fashioned customer engagement seems to be a key part of Games Workshop’s winning formula.

“You can see that in its numbers; revenue, profit and dividends continue to rise at pace and so does the share price.

“Games Workshop has cracked the model for getting people to visit its stores and its website. Now it is trying to sweat its intellectual property which suggests that more attention will be paid to royalty income in the future as a measure of its success.

“However, plans to create a TV show based on its Eisenhorn novels are arguably a high risk move. Plenty of popular novels haven’t translated well to the small screen, either because of poor scripts or they simply didn’t come across in the same way that people interpreted and visualised the story in their head. There is also the risk that many viewers don’t understand the plot without knowledge of the original novels.

“Games Workshop says it has created a team to learn about the media industry so that it can ensure a TV series would be true to its intellectual property. In its defence, the business does seem careful about everything it does and it is unlikely it would approve any old production just in the pursuit of additional income.”

Boohoo

“Online ‘fast fashion play’ Boohoo shows no signs of slowing down. At a time when many traditional clothing retailers are struggling, the company is continuing to prove the benefits of its purely online operation, emerging as one of the sector winners from the crucial festive period.

“Impressively, growth is actually accelerating from the autumn according to a four-month update encompassing Christmas and Black Friday trading. Against this backdrop a very modest retreat in margins is likely to be forgiven by the market.

“The business has demonstrated its ability to move quickly to respond to the fluctuating tastes of the young women which represent its core demographic of 16 to 24 year olds.

“This group will benefit from an increased National Living Wage and they are arguably less burdened by things like mortgages and children. As such, they may have enough disposable income to be able to regularly shop at Boohoo given its products are relatively inexpensive.

“Smaller brand Nasty Gal is the star of the show in the latest trading update but the more established Pretty Little Thing and eponymous Boohoo brands are also churning out impressive levels of growth.

“Attempts to branch out by acquiring once successful high street brands Coast and Karen Millen are as yet unproven. If successful this could offer another avenue of growth for the company, with the potential to pick up other ailing high street operations with lingering brand appeal on the cheap.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.