Mixed messages shake the market and JD Sports weighs up the future for Go Outdoors

“Investors continue to be pulled from different directions by various headwinds and tailwinds. On one hand there is positive news such as Spain accepting UK tourists without the need for quarantine, adding to the list of restrictions being lifted across Europe. On the other hand, the US still seems to be struggling to contain the coronavirus and the risk of a second wave is still front of mind for many people,” says Russ Mould, Investment Director at AJ Bell.

“The net effect was a poor start to the new trading week for markets, with the FTSE 100 down 1% to 6,230, Germany’s DAX trading 1.2% lower, and Hong Kong’s Hang Seng index falling by 0.7%. However, pre-market indicative prices suggest that US stocks will open flat later today.

“On the UK market, investors sold down stocks in the energy, financial and travel sectors. Gold miners were in demand including a 1.7% advance from precious metals producer Fresnillo.

“A 0.3% rise in the pound against the US dollar to $1.2388 was good for UK-facing companies including housebuilders Barratt Developments and Taylor Wimpey who topped the FTSE 100 leader board. Other UK domestic players in demand included BT, Next, Auto Trader and Morrisons."

JD Sports / Go Outdoors

“JD Sports-owned Go Outdoors should have been a beneficiary from the current restrictions on forms of travel.

“There is likely to be a boom in staycations this year and camping trips could be the solution to many people seeking to get away from the confines of their home without having to get on a plane. That should have been a tailwind for Go Outdoors’ tent sales.

“The push for more people to cycle to work rather than use public transport should have also driven the retailer’s bike sales.

“Sadly, the timing of these tailwinds might have come too late. Closure of Go Outdoors’ stores during lockdown will have been negative for sales despite it also having some support in the form of online operations, compounding a pre-pandemic problem that the business was already struggling.

“JD Sports probably had good intentions to grow the business when it bought the company for £112 million in 2016. It now looks as if the acquired business hasn’t been given enough attention, effectively taking a back seat while JD concentrated most of its effort on its shoes and athleisure empire.

“JD has been exploring its options with regards to the business, yet it seems likely this could be yet another retail operation to go into administration.”

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