“The FTSE 100 dipped at the open but remains within striking distance of its all-time highs above 8,000 as investors eye a reading of US consumer confidence this afternoon,” says AJ Bell Investment Director Russ Mould.
“This could reinforce or undermine the ‘soft landing’ narrative – with the Federal Reserve looking to tame inflation without causing too much economic damage in the process.
“Mining stocks were helping to clip the wings of the UK market amid growing tensions between major commodities consumer China and the West over hacking by Chinese spies.
“Hospitality had a tough time during Covid and the inflationary pressures of the last couple of years have only compounded the situation. This is the unhelpful context in which Revolution Bars operates and it’s not a major surprise to see the company confirm speculation it is looking to raise emergency cash and slash its workforce. The share price reaction suggests the market is expecting a discounted and highly dilutive fundraising.”
Ocado / Marks & Spencer
“Any joint enterprise doesn’t have the best prospects if participants are at odds with each other, but the Ocado Retail venture has enjoyed a robust period of trading despite the differences between partners Marks & Spencer and online groceries specialist Ocado.
“Sales were up and not just because of rising prices. The venture is actually seeing significant volume growth as it wins market share. This is partly because it saw less price inflation than the wider market.
“This positive trading comes after a long period of disappointing performance and you can understand Marks & Spencer’s frustration – when it agreed the tie-up with Ocado in 2019 it set targets which have subsequently not been met.
“Ocado has threatened legal action over an outstanding, performance-dependent instalment in the £750 million agreement. Its chief executive Tim Steiner says Covid should be a factor when judging the performance. While there were obviously challenges relating to lockdown, the whole online groceries space received a significant boost in demand thanks to the pandemic.
“At least the turnaround efforts at Ocado Retail appear to be bearing fruit. However, whether Marks & Spencer will continue its arrangement with Ocado has to be open to question given the somewhat fractious relationship.
“For Ocado, the UK retail operation is only one of its concerns as it looks to demonstrate to the market that it can achieve sustained profitability with its Ocado Smart Platform one-stop-shop solution for global supermarkets.”
ASOS
“ASOS’s ongoing sales decline is extremely worrying. It suggests the choice of products on offer is completely wrong or shoppers are simply going elsewhere to buy their clothes, potentially Shein or Primark as they have similar customer demographics and cheaper price points.
“However, it’s worth noting that ASOS has been sitting on a mountain of unsold clothes and the priority has been to clear this inventory. Naturally, if it is slashing prices on this stuff, customers might be tempted to buy the discounted goods rather than full-price items. As a result, it is difficult to get a true picture of sales trends as the figures continue to be distorted by the inventory run-down.
“The company continues to be upbeat despite the horrific top-line numbers. Management needs to keep a brave face to convince staff and shareholders that everything is ok. Clearly it is not.
“It’s notable that retail vulture Frasers Group increased its position in ASOS last week, now accounting for 27.1% of the business via a mixture of shares and financial instruments. Frasers likes to pounce on the weak and vulnerable and ASOS certainly fits the bill. As always with Frasers, a takeover is unlikely unless ASOS goes into administration, which doesn’t appear to be on the cards at the moment. Instead, the weaker ASOS gets, the bigger the power Frasers has as a shareholder to try and strike collaborative partnerships.”
These articles are for information purposes only and are not a personal recommendation or advice.
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