“The commodities market continues to be on fire with a near-8% rally in iron ore and a 2.6% jump in the price of copper setting the tone for what could be an interesting week on the markets,” says AJ Bell Investment Director Russ Mould.
“Commodities are being driven by stronger demand as the global economy recovers from the pandemic and supplies are getting tighter.
“Given its heavy weighting towards natural resources, the FTSE 100 benefited from the latest surge in commodity prices, with seven of the index’s top 10 risers being mining companies, led by Rio Tinto and BHP.
“The index traded 0.1% higher at 7,138, with the miners more than offsetting weakness from consumer goods and tobacco companies – effectively showing that investors today were ‘risk-on’ and happy to bid up higher risk stocks and less interested in more defensive names like Unilever and British American Tobacco which tend to see earnings tick over in both good and bad economic conditions.”
“The reopening of non-essential retail has got people out of the house and Greggs has benefited from increased traffic and temporarily reduced competition from cafes and restaurants.
“A greater number of people returning to the office will also have helped, as workers nip out at lunchtime for a sandwich and a coffee.
“Greggs’ progress pre-pandemic made it one of the big retail success stories, shedding its baker identity to become a major force in food on the go. As the pandemic struck, food on the go became food at home and so Greggs had to think on its feet.
“A home delivery service proved popular and non-public transport locations such as retail parks were resilient, albeit the overall group earnings still fell in 2020 as getting large numbers of people into high street and railway-based stores was always going to be struggle when the Government was telling everyone to stay home where possible.
“Now it is betting on a big recovery in pre-pandemic activity once considered ‘normal’, namely going to work in an office, meeting friends and family for social activities, and more movement via personal and public transport around the country. Its stores are conveniently placed to attract people as they go about their day.
“Many people think we’re going to see structural change in where work is done, however we are still creatures of habit and it wouldn’t be surprising to see queues return to Greggs’ stores for bacon baguettes, sausage rolls and steak bakes slowly build up as more Government restrictions are lifted and companies lay down their long-term working strategies. Even with some people working full time from home, the nation isn’t going to hide away like it did in 2020.”
“Seasonal trading can be a mixed blessing for a business – clearly it leaves you heavily reliant on just one or two periods but when it goes right, as it has for chocolatier Hotel Chocolat, the impact can be highly impressive.
“More and more people seem to be reaching for Hotel Chocolat products when they want a little bit of affordable luxury and occasions like Mother’s Day or Easter have been celebrated with gusto by people looking to break up the monotony of lockdown.
“Nonetheless it’s still impressive that the sales in the eight weeks to 25 April were up substantially not just on last year’s heavily disrupted trading but also on pre-Covid levels in 2019.
“It demonstrates that the company has done a good job of adjusting to the realities of the pandemic by shifting more of its sales through its website and third parties when its stores were unable to operate.
“The recent exit of rival Thorntons from the high street may also prove helpful to Hotel Chocolat as the easing of restrictions continues, allowing it gobble up market share.
“Hotel Chocolat has done an impressive job of building out its brand in recent years, something reflected in the 157% premium it trades relative to the price at which it made its market debut back in 2016.”
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