Whitbread all set for summer boom and Dr Martens trips up as profit falls

“The US Federal Reserve has proved a bit of an unreliable partner to the markets, promising not to raise rates too far or too fast and then suddenly announcing an acceleration in its plans on this front,” says AJ Bell Financial Analyst Danni Hewson.

“For now investors seem to largely be taking these developments in their stride – perhaps reassured by Fed chair Jay Powell’s comments that the guidance for two interest rate hikes in 2023 should be taken with a ‘grain of salt’.

“After all, we’re still talking about something which might happen in two years’ time and plenty could change in the interim, plus the reason rate rises are moving up the agenda is an improving economic outlook, so there is positive news here too.

“However, it is a reminder that investors will eventually have to confront the reality that the current ultra-loose monetary policy won’t last forever and there were signs of volatility in the bond market off the back of the Fed’s announcement with the dollar also rising to multi-month highs.”

Whitbread

“The great British summer holiday boom of 2021 is music to the ears of Whitbread.

“If we can’t get on a plane for two weeks in Spain, the good old British seaside will have to do instead, and there is a race to book up accommodation.

“Whitbread’s Premier Inn chain has long been pitched as family-friendly and demand is picking up for its hotels. A good chunk of the nation will have opted for its clean sheets rather than risk staying in run-down bed and breakfast establishments along the coast.

“Theoretically the greater the demand, the higher the prices that Whitbread can charge so it looks like business will be booming for the hotelier in 2021. That’s a massive difference to last year’s washout.

“The only thorn in its side is the lack of demand growth in central London and airport locations, historically key territories for the company. London establishments have tended to be filled by foreign tourists, UK residents on sightseeing trips to the capital, or business travellers.

“Air travel restrictions have cut off the natural flow of overseas guests and people staying in airport locations ready for early flights the next day. Business travel looks unlikely to pick up in large volumes this year, but there could be an increase in trips to London over the coming months as people look for things to do.

“Whitbread will have to be careful with pricing in all but the prime seaside locations, keeping room rates attractive enough to fill less popular destinations. It is better to fill a hotel at lower rates and then be overly aggressive with pricing just becomes some territories are doing well.

“It certainly looks like a summer of fun for Whitbread’s earnings recovery, but challenges remain from autumn onwards. The company will have to come up with some clever marketing to encourage people to travel and fill its rooms.”

Dr Martens

“Iconic footwear maker Dr Martens has tripped up with its first results since joining the stock market. Profit has fallen as the company counted the costs of a stock market listing which included a big bonus paid out to staff.

“Otherwise there were more positive signs of the business taking a step forward with sales increasing and the company shifting a significantly greater proportion of its products online – a trend accelerated by the pandemic.

“While the aim is to increase web-based sales further in the future, some people will want to try their shoes and boots on first before buying, which could be an obstacle to these efforts.

“There may be some disappointment that, despite a robust sales performance, the outlook given by Dr Martens has remained unchanged. Newly listed firms often set the bar low on guidance so they can clear it early in their life as a public company.

“The company continues to push a strategy of increasing the amount of product it sells direct to consumers, something a lot of major brands are targeting as it gives them greater control over the way it engages with customers.

“The relationship with brand devotees is an important issue as Dr Martens continues to faces grumbling in some quarters over a deterioration in the quality of the product, particularly since moving its manufacturing base to Asia nearly two decades ago.”

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