Whitbread looks ahead to full reopening, and Halfords pedals hard to go backwards

“The FTSE 100 failed to hold on to yesterday’s gains as a big rally on Wall Street overnight was followed by mixed trading in Asia. The FTSE 100 fell 0.9% to 6,231.44,” says AJ Bell Investment Director Russ Mould.

“Downbeat commentary emanating from the US Federal Reserve, a new lockdown in Melbourne and spiralling US Covid-19 cases created a more risk-averse mood among investors.

“Oil prices were markedly lower, with Brent Crude dropping 1% to $42.69. Gold prices were steady around the $1,780.86 mark.”

Whitbread

“Premier Inn owner Whitbread won’t exactly be getting a good night’s sleep guaranteed on the basis of today’s latest trading update, but it might be feeling a bit more relaxed than it did at the height of lockdown.

“This latest statement is effectively in two parts. Inevitably the first quarter, which coincided almost exactly with the start of the coronavirus pandemic, saw a plunge in revenue.

“The second quarter should be a story of gradual reopening with all of its hotels and restaurants expected to be up and running by the end of July.

“The commentary on initial trading post-lockdown is interesting and potentially leaves Whitbread better placed than some of its rivals if the trends it has identifies persist over the longer term.

“The company has seen decent demand in regional tourist hotspots but subdued appetite in London and other metropolitan areas.

“Unlike other chains which are more centred on the capital and other cities, Whitbread has sites throughout the country.”

Halfords

“No matter how hard it tries, Halfords always struggles to convince the market that it is capable of doing well.

“Sales of bikes have soared during lockdown and it is now almost impossible to walk into its stores and buy a two-wheeled contraption. All the bikes on display are likely to have been pre-ordered by customers and are simply waiting for collection. Any new stock it does receive is likely to be online orders that need to be assembled and will soon go straight back out the door.

“It’s frustrating for customers visiting its stores wanting to buy a bike and no doubt frustrating for Halfords’ management who wish they could keep up with soaring demand.

“While it is encouraging to see the initial signs of recovery in motor-related sales, the fact that cycling products are lower margin means its main growth driver is currently a less profitable one. Selling bikes involves quite a bit of manual labour with staff having to assemble and adjust products.

“The lack of earnings guidance has also disappointed the market and, together with the lower profitability factor from having a bigger weighting from cycling sales, has resulted in a share price decline.

“Theoretically, as a retailer in demand during lockdown, Halfords should be feeling confident about its near-term and medium-term prospects. However, failing to provide earnings guidance sends a weak signal.

“The company provides different scenarios, saying it will either make or lose a certain amount of money, but that still isn’t helpful enough to investors who want to see management have a firmer grip on how the year will play out.”

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