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“It seems investors are very much of the mind that it is still worth backing companies that will benefit from the reopening of the global economy, despite the negative backdrop of France closing schools in its third lockdown and Brazil still struggling to get Covid under control,” says Russ Mould, Investment Director at AJ Bell.
“The biggest contributors to the FTSE 100 in index point terms were miners Glencore and Rio Tinto as plays on stronger commodities demand and positive read-across from US President Joe Biden’s plan to invest heavily in infrastructure.
“Next’s results went down well with the market, while catering group Compass was also among the top risers as investors saw better prospects ahead as more people return to offices and education establishments in the near-term and sports and leisure-related demand starts to pick up.
“In backing these companies, investors are effectively looking past any short-term noise and potential setbacks to getting the pandemic under control, and instead looking well into the future and taking the view that earnings will not just start to recover in 2021 but also keep improving thereafter.
“Asian markets were certainly in fine form, including a 1.6% rise in Hong Kong’s Hang Seng index where investors flocked to own shares in technology and healthcare stocks. Deliveroo’s IPO might have been a flop in the UK, but investors were hungry for fellow food ordering platform owner Meituan, whose Hong Kong-listed shares jumped nearly 9%.”
Next
“Just how committed is Next to remaining a physical retailer? While the company has appeared to rule out further closures in the current financial year it is clear it is prepared to be tough with landlords as it looks to get occupancy costs down.
“As one of the few reliable rent payers in the sector, Next is in a very strong bargaining position. And by pushing for reductions, it looks like it will just about be able to stay profitable on its retail stores this year.
“Next should also benefit from the exit of weaker rivals from the market – there is little doubt that it is one of the few remaining unburnished stars in the UK retail space.
“The shops potentially also have a role to play in showcasing Next products, alongside being a hub to collect stuff bought online – with recent examples of stores helping with some of the logistics attached to fulfilling online orders.
“The company’s ability to respond to the pandemic has been impressive and is reflected in its continuing profitability, with profit notably expected to return to roughly pre-Covid levels in the current financial year.
“This will increase anticipation that the company will resume dividends – a move it is resisting for now – sooner rather than later.
“Next is also aware of the need to retain newly won online customers in the under-20s and over-60s age groups. Supporting its ability to do so is a willingness to change in order to cater to customer tastes by, for example, carrying third-party brands on its site and apps.”
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