FTSE 100 higher as US indices hit new record highs again, Marston’s and Premier Foods toast strong trading, Primark saved by Christmas boost and Boohoo CFO exits

“The FTSE 100 ticked higher on Tuesday, building on Monday’s gains as US stocks mark new record highs for the second session in a row,” says AJ Bell Investment Director Russ Mould.

“For now, markets have shrugged off their New Year malaise, but investors’ newfound optimism could be tested in the near term with central bank meetings rapidly approaching on the horizon. At some point rates will have to be cut for stocks to maintain their upward trajectory.

“Marston’s is the latest hospitality company to toast a good Christmas, suggesting people might have prioritised a night out over a trip to the shops during the festive period. With costs coming down, a sector which has endured an extremely difficult time over the last four years is gradually picking itself off the floor.

“Premier Foods also saw strong trading over Christmas – its portfolio of products proving popular with shoppers stocking up for time spent with friends and family. This business has really got its act together of late, sorting out a mess of a balance sheet and maximising the potential of a collection of brands with heritage.

“Theoretically, it should be a good time to be a pawnbroker given the tough economic environment and the pressures on households. That’s largely reflected in H&T’s latest update but issues in other parts of the business, including the retail arm, mean earnings are set to come in below expectations.”

Primark (Associated British Foods)

“Christmas saved the day for Primark after a slow start to its first quarter period. Unfavourable weather conditions hurt the retail sector in the latter part of 2023, leaving shopkeepers with unsold jumpers and coats as unseasonably warm weather meant consumers weren’t compelled to buy what was on the shelves.

“Fortunately, Primark had a strong line in Christmas-themed clothes and these sold well, helping to avoid disaster. For example, fluffy jumpers, pyjamas and onesies with film and cartoon-characters filled the shop floors and these made for ideal Christmas presents. Other ranges including performance wear were also big hits.

“There are still challenges to overcome. The pace of sales growth for Primark’s retail arm slowed dramatically in the first quarter at 7.3% versus 14% in the second half of its previous financial year. That matches a trend seen in other parts of the fashion industry, illustrating how consumers are still feeling the pinch from higher interest rates and are being more cautious with how they spend money.

“The weaker demand equation is widely known and so success is being judged on the ability to sell clothes without resorting to heavy discounts and to take market share off rivals. Primark is doing everything it can to tick off these boxes.

“Ongoing store expansion means Primark has more opportunities to earn money and it believes margin improvements give it some breathing space should disruption in the Red Sea lead to supply cost inflation. Given the fragile backdrop, parent company Associated British Foods should be sitting more comfortably than most other retailers.

“A key thing that works in Associated British Foods’ favour is its conglomerate structure, with interests in grocery, ingredients, agriculture and sugar helping to provide some ballast to the retail arm. If one of the arms is lagging, there is support from the other businesses and it’s always been that way, hence why the company is quick to shoot down any suggestions it should demerge Primark amid the argument it could be worth a lot more as a standalone business.”

Boohoo

“There wasn’t too much for investors to chew over in Boohoo’s latest update on trading. There will be some relief the company is on track to hit the downbeat expectations unveiled in October but that is overshadowed by the departure of chief financial officer Shaun McCabe with immediate effect.

“It’s the kind of development which reinforces the impression there’s too much noise around Boohoo, whether it’s ethical questions over its supply chain, sustainability concerns around fast fashion or a boardroom battle with fellow AIM company Revolution Beauty.

“McCabe had only been in the job for a little over a year and to lose a finance chief so rapidly is never a great look, even if Betfair and Zoopla alumni Stephen Morana looks a solid appointment as his replacement.

“The fact Morana has previously served on Boohoo’s board as a non-executive director should mean he has a decent handle on the business too. He rejoins the company at a challenging time. The shares trade at a fraction of their pandemic highs as the whole online fast fashion model, of which it is a leading proponent, comes into question.”

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