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“The FTSE 100 nudged up despite last night’s announcement of a delayed easing of restrictions in the UK,” says AJ Bell Investment Director Russ Mould.
“A late surge on Wall Street saw US stocks mark new records with smouldering inflation fears apparently doused by central bankers.
“The latest test of the market’s more relaxed attitude over rising prices is likely to come with the next meeting of the Federal Reserve tomorrow when its position on rates and stimulus will be announced.
“The hospitality and travel stocks which had sold off ahead of the delay to ‘Freedom Day’ in the UK made partial recoveries as investors welcomed some form of clarity over the new 19 July unlocking date.
“The move had been widely trailed in advance and therefore did not come as a huge shock to the market.”
Boohoo
“When a company sets the bar high in terms of sales growth expectations it makes life harder in the future. Boohoo is a classic example, where it has delivered very strong levels of sales growth over the years, but that’s made the market think it is a superstar and will always smash expectations.
“Its latest update shows decent levels of growth in the UK and US. Sadly, it’s not enough for the company to raise its earnings guidance which is a disappointment in the eyes of the market. Europe and its other overseas regions have gone into reverse, with a decline in sales. Gross margins are also down, although the 60 basis-point reduction was less than the 90 basis points predicted by analysts.
“There are quite a lot of moving parts with Boohoo beyond the headline sales figures. It is having to juggle the integration of acquired Debenhams assets alongside an ongoing plan to improve governance practices and improve monitoring of its supply chain, as well as investing in its business to improve infrastructure.
“The best Boohoo can do is stay focused and try to execute on its plans as best as possible. The slow easing of lockdown restrictions in its various sales territories should provide a new catalyst for sales as individuals buy clothes for their new-found social life.
“If it can sustain decent levels of growth in the UK and US and repair its damaged reputation following the supply chain scandal, Boohoo could be coming out smiling. It just isn’t quite there yet.”
Bellway
“Bellway is making hay while the sun shines. Amid strong demand for homes, the housebuilder is setting itself up for the future with its record investment in land acquisitions.
“While land prices may not be quite as depressed as they were in the initial stages of the pandemic, it is still an opportune time to buy and this should have positive implications for the profitability of homes built on these plots and for future growth.
“The stamp duty holiday has clearly been a driver for demand but there are other factors at play as people look to get more space, largely for home working, in the wake of the pandemic. This in turn means people are buying more of Bellway’s larger, higher quality homes, which is driving up average selling prices.
“The main negative is the rising raw material costs and difficulties in securing skilled labour. At the moment these headwinds are having only a limited impact as house prices surge ahead. However, Bellway and its peer group may face a more difficult situation if the housing market cools.”
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