“If mining stocks are bellwether for the global economy, then investors need to sit up and take notice that the sector has been one of the worst performers in the past month,” says AJ Bell investment director Russ Mould.
“Metals and minerals producers were principally to blame for the FTSE 100 falling 0.3% to 7,046, in part caused by concerns about covid spreading across Asia again and how that might affect commodities demand. That worry was also behind share price weakness in luxury goods companies including Kering and LVMH, down between 3% and 4%.
“The luxury goods sector enjoyed a strong run earlier this year as investors speculated that the wealthier got even richer during the pandemic as they were trapped at home, with no fancy trips or outings. As restrictions eased, luxury goods companies were expected to see a big surge in sales as wealthier individuals splashed their cash.”
JD Sports Fashion
“What JD Sports has achieved in the retail sector in the last decade or more is remarkable, and that is reflected once again in record first half results.
“Partly the business has benefited from wider trends around athleisure, as the lines between what younger people wear to work out, go out and stay in become more blurred.
“However, it has been razor-sharp in its focus on its customers, delivering what they want, when they want it and how they want it.
“This has been backed by lots of boring stuff like keeping a tight rein on costs and stock as well as having the warehousing capacity to ensure it could shift from physical stores to its digital channel when covid restrictions demanded.
“JD has also been ready to take advantage of the pent-up demand as restrictions have been eased and people have returned to its shops.
“JD has been bold in looking to break America, propelled by the 2018 acquisition of Finish Line, and this daring has been rewarded handsomely, particularly of late when many US customers have had stimulus cheques to spend.
“The next step in the acquisition strategy may be to step out into the broader fashion market amid reports of a bid for popular online women’s fashion brand Missguided.
“There are risks facing the business. Some of its most important brands like Nike and Adidas are looking to expand how much they sell direct to consumers and an economic downturn or widespread unemployment could crimp consumer spending.
“Footfall is already waning after a post-lockdown spurt and the company is being hit by supply chain issues like many other businesses. But based on recent history, few would bet against JD Sports navigating these issues successfully.
“Suddenly the potential blocking of its acquisition of Footasylum, recently announced by the competition authorities, is looking like the merest of slips for this hugely impressive operator.”
“In a traditional warehouse, when two workers collide one might expect a few sore heads and some cuts and bruises. When it comes to Ocado, the workers catch fire and cause all kinds of disruption. That’s because many of its workers are actual robots and there is an army of them running around trying to pack bags and fulfil an ever-increasing number of customer orders.
“Ocado’s latest trading update for its joint venture with Marks & Spencer shows how the quest for efficiency completely backfires when a few simple components fall out of place.
“It has now suffered two fires caused by robots which is damaging to more than just one quarter’s sales. Its business model is dependent on signing up more grocery sellers to use its logistic platform and systems. Any prospective client might look at the considerable disruption caused by seemingly a small accident and think twice about signing up Ocado.
“The latest incident has cost it millions in pounds just at a time when it is also having to stomach considerable extra costs from human labour, particularly delivery drivers. All of this is a major headache for management at a time when demand for the UK food delivery business continues to grow.
“Ocado continues to increase capacity to meet demand, yet the market is not focused on the fact that more and more consumers want to use its services. The share price has taken a real beating this year because it has been slow to sign up new grocery partners for its systems, and the second robot fire has hurt its credibility.”
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