FTSE higher after weak retail sales, InterContinental Hotels gets staycation boost

“The FTSE 100 started in decent fashion on Friday after a week in which the markets have turned downwards, albeit modestly,” says AJ Bell Financial Analyst Danni Hewson.

“The rise in the index reflects its global horizons with the latest news on the UK economy hardly doing much to inspire confidence.

“An unexpected fall in retail sales, which came despite a boost from rising fuel prices, demonstrating that things are getting tougher out there.

“You wouldn’t think of a stock exchange as an obvious victim of supply chain issues, but London Stock Exchange’s warning that some of its spending on new technology could be delayed.

Sainsbury’s disappointed the market with the news that it is ending talks over a sale of its bank division. A more streamlined Sainsbury’s might have made more sense as a bid target, and there has been significant speculation on this front since the takeover of rival grocer Morrisons.

JD Sports took a step into Greece and Cyprus with the purchase of an 80% stake in Cosmos Sport for an undisclosed sum – a deal which could expand the company’s footprint and bring diversification benefits.”

Intercontinental Hotels

“The pandemic had an outsized impact on the hotels sector and InterContinental Hotels was no exception.

“Today’s update confirms a recovering picture with the company gradually clawing its way back to its pre-pandemic levels of trading.

“Its various franchises, including Holiday Inn and Crowne Plaza, have been boosted of late by domestic leisure travel, as people holidayed at home rather than jetted off overseas. This trend was particularly notable in the US where the gap between pre-Covid and post-Covid trading is narrowest.

“The group’s commitment to growth is notable but it is taking a refined approach, rather than chasing growth blindly, with the business also exiting a large number of hotels and committing to the improvement of others.

“The cost base is being steadily reduced, with suggestion these savings can be sustained even as demand returns to more normal levels across the board.

“An advantage InterContinental enjoys over a lot of its peers is it only owns a handful of hotels and focuses instead on franchising and managing premises.

“As well as generating premium margins, the asset light model also enables it to grow quickly with limited capital investment and to focus on building preferred brands based on guests’ needs, and on strong delivery systems, such as its branded hotel websites and call centres.

“This could help it to adapt to changes in the industry – including the potentially permanent reduction in business travel.

“However, for all the positivity the numbers being reported today are in the rear-view mirror and there may be some trepidation that rising Covid rates in some of its markets will lead to renewed restrictions which could negatively affect performance.”

These articles are for information purposes only and are not a personal recommendation or advice.

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.