“The FTSE 100 managed to avoid being dragged down too far by Reckitt’s disappointing fourth quarter numbers which also triggered a minor sell-off in Unilever,” says Russ Mould, Investment Director at AJ Bell.
“Vodafone came to the rescue after its shares jumped on talks to potentially sell its Italian operations. The telecoms group has been stuck in the mud for a long time, trying to revive growth and reignite a spark in the business.
“Work to streamline the group has already involved various deals but the market is still not convinced Vodafone has found the magic solution judging by its share price performance over the past five years. The Italian deal, if successful, is a step in the right direction but only one small piece of the puzzle.”
Reckitt
“So much for the idea that big brand owners are bulletproof during periods of higher inflation. It’s clear from industry trends that cash-strapped consumers have shifted to cheaper alternatives including supermarket own-brand items.
“As the owner of a large portfolio of well-known brands, Reckitt has found life a lot tougher and its latest results suggest its pricing power isn’t as strong as some people thought. The idea that it can keep pushing up prices without damaging demand has gone out the window as its fourth quarter numbers are truly miserable. It looks like people are voting with their feet and going for the cheaper option.
“Reckitt’s results are plagued by a multitude of problems. Sales volumes fell 4.3% in the fourth quarter which is a worrying sign for the company. It reported declining health sales, a big drop in nutrition revenue and revealed that some employees had been up to no good with regards to accounting issues in the Middle East. For a company that was once seen as an industry leader, Reckitt has been a big disappointment in recent years and the latest results keep that theme going.”
Halfords
“Halfords’ profit machine has gone into reverse as a result of customers watching their pennies and wet weather deterring them from visiting its stores and buying winter products. That suggests it could be sitting on excess stock and will need to find a way to clear it.
“It means Halfords has gone back to days of old where it would regularly disappoint with earnings guidance and always have some excuse as to why its business is not running smoothly.
“Some of Halfords’ problems are out of its control such as weaker consumer confidence. But it’s hard to ignore the shambolic state of its stores. They are unappealing to visit and have some serious flaws which any good retailer would have fixed immediately.
“For example, a lot of its stores do not have their cycle department on the ground floor so customers needing repairs have to lug their bike up a flight of stairs. That can be off-putting for someone wanting a simple repair job. Bikes for sale are crammed together so it is hard to properly view the range as a prospective customer. Bike technicians always seem to be run off their feet so perhaps it needs to hire more people.
“Selling car accessories is not glamorous but it feels as if Halfords could make more of an effort with in-store imagery, displays and promotions to entice people to buy products.
“Fundamentally, Halfords has been driving in a different direction for some time and the destination is motoring services. It clearly sees more opportunity to make money from replacing tyres and doing MOTs than selling chamois leather or antifreeze. However, the two areas go hand in hand as things drivers need or want, which means Halfords must rethink how space is used in-store and become smarter at marketing.
“Chatter about a takeover approach from Redde Northgate last November amounted to nothing, but a resurrection of profit warnings from Halfords could prompt shareholders to push for change which could include new ownership.”
These articles are for information purposes only and are not a personal recommendation or advice.