Cineworld suffers from lack of major releases, and Pets at Home trading ahead of expectations

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.

“One step forward, two steps back. It appears the wall of worry is just too big for the markets to climb right now without the odd setback,” says AJ Bell Investment Director Russ Mould.

“Bricks in that wall include the coronavirus second wave, an end to the Brexit transition period which could see an effective border for hauliers in Kent, uncertainty over the economic outlook thanks to Covid-19 and escalating political tensions in the US.

“Donald Trump’s continuing reluctance to confirm he would accept a loss in the Presidential elections in little more than a month carries the threat of taking the country into unprecedented and potentially dangerous territory. Though this may be little more than rhetoric and Trump could triumph anyway.

“The bitter campaign for the White House is also preventing the US from agreeing a fiscal stimulus package – leading to growing grumbles from the US Federal Reserve and it was little surprise to see US stocks fall against this backdrop.”

Cineworld

Cineworld is doing everything it can to get people through the door, including discounts on memberships, drinks promotions, and a message of reassurance that the staff are trying to keep people safe and that its cinemas are clean.

“Yet you can’t get over fact that the film slate will always be the primary attraction and there currently isn’t the pulling factor.

“Tenet had all the explosions and tension you want in a blockbuster film, but plot confusion meant mixed word of mouth and so ticket sales have underwhelmed. Disney’s Mulan has gone straight to streaming and another potential family favourite, Wonder Woman 1984, has been delayed until Christmas.

“In the hours since Cineworld signed off its trading update, two more big name films, West Side Story and Black Widow, have been pushed back to 2021. Ultimately there isn’t anything out now or coming very soon that will really make people want to take the risk of sitting in a room with a load of strangers for two hours. If the new James Bond film No Time To Die gets pulled from its November release date then the cinema industry is really in trouble.

“Cineworld must contend with the growing risk that governments in its operating countries could strengthen restrictions on social gathering. That would dampen the chances for getting people in front of the big screen and make film studios more nervous about releasing big films at a sensitive time.

“Cineworld says this situation would ultimately have a negative impact on its financial performance and likely require the need to raise additional liquidity. That’s a dangerous situation given it is already up to its eyeballs in debt. Shareholders have been supportive to date but at some point, they might have to question whether they’re simply throwing money away.

“Management says current trading is encouraging but that’s off a base where expectations are rock bottom. Cineworld is walking a very long tightrope with the winds picking up that could knock it and the cinema industry down.”

Pets at Home

“In the UK we are rather fond of furred and feathered friends and it is our status as a nation of animal-lovers that helps underpin the whole proposition for specialist retailer Pets at Home.

“In the past less than flawless execution and the competitive threat posed by non-specialists like supermarkets has undermined what arguably should be quite a compelling story.

“But assuming the recently stricter restrictions introduced in the UK don’t trip the company up then it looks like it may have started to get its act together.

“Demand for the pet care services and products offered by the chain could prove resilient, particularly as there are signs that pet ownership is going up. With more people working from home and spending more time at their abode the scope for owning and taking care of an animal is arguably increased.

“People’s emotional attachment to their pets also means keeping them healthy, happy and well-fed will be a priority even against a difficult economic backdrop.

“Pets at Home can’t rest on its laurels though; it needs to keep improving, boosting numbers for its loyalty card scheme and subscription services, getting the little details right and fending off the competition.”

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