“The FTSE 100 slumped amid concerns about escalation in the Middle East and higher than expected wage growth,” says AJ Bell Head of Financial Analysis Danni Hewson.
“Despite the labour market cooling, pay inflation remains relatively stubborn and this will concern the Bank of England as it could be a sign of a rising price environment becoming more entrenched.
“Oil prices were higher on the ratcheting Middle Eastern tensions and as the Chinese economy grew faster than expected.”
Superdry
“Once something of a market darling as it rode a wave of consumer demand for its faux-Japanese stylings, Superdry has been firmly out of fashion with investors and is set to delist as part of a rescue plan which will see landlords take some of the pain.
“Under the proposals, with CEO and founder Julian Dunkerton leading a fundraising effort, the company will cease trading on the London stock market from July. Currently changing hands for little more than 5p, at its 2018 heights the shares traded around £20.
“The hope will be the company can restore its ailing brand to health out of the glare of the public markets.”
DS Smith
“DS Smith is set to be the first FTSE 100 takeover of the year as US firm International Paper wins the battle to buy the packaging firm. Mondi has lost the fight after the target’s board recommended that shareholders go with International Paper’s higher offer.
“Given the offer is an all-share deal, it’s interesting to note that UK investors in DS Smith might not need to fret about owning foreign shares. International Paper is looking at a secondary listing of its shares on the London Stock Exchange which means DS Smith investors inheriting the US company’s stock through the takeover would still be able to retain exposure to the enlarged group via UK-listed shares.
“That’s a positive step and good for the reputation of the UK stock market that a US firm sees value in having a London presence, even though this type of listing means it wouldn’t qualify for the FTSE 100.
“International Paper might have also taken the view that offering UK-listed stock would help get the takeover over the line. Historically, certain share-based deals have failed because UK investors didn’t want foreign stock.”
B&M
“The demise of Wilko should have benefitted B&M over the past six months as a key competitor was removed from the market. The jury is still out as recent performance has been disappointing.
“On one hand, guidance for adjusted earnings to come in at the top end of previous guidance is vindication that B&M’s strategy plays well to an uncertain economic backdrop. Its products are affordable and when consumers are watching every penny, value propositions shine through and through.
“However, B&M’s performance is not quite as solid as you might think. It’s clear that an earlier than normal Easter has pulled forward some sales which might have normally occurred in early April, outside of the trading period being reported. Had it been a ‘normal’ Easter date, it seems as if B&M’s trading update might not have been so bullish.
“Even with the Easter boost, fourth quarter UK like-for-like sales growth of 2.9% looks pedestrian. It implies that the company is finding it harder to keep churning out the success that has made it one of the big retail winners over the past decade.
“While the company continues to find ways to expand its store estate and plant flags in more territories, the competition is heating up with many other retailers and grocers offering more value-priced products with great success.
“Alex Russo has been in the top job for nearly two years and nothing radical seems to have changed about the business. He’s certainly kept the ship steady, but perhaps it’s time for more innovative thinking.”
Dr Martens
“The market is putting the boot into Dr Martens as it reports a bleak profit outlook and its chief executive Kenny Wilson steps down. Wilson probably had little choice after an extremely disappointing start to life as a public company since listing in 2021.
“The company served up four profit warnings in 2023 with a difficult consumer backdrop not helping. However, it has also been the author of its own misfortune with a series of operational mishaps including inventory mismanagement.
“In this context investors might have wanted to see an external candidate come in and shake things up. However, chief brand officer Ije Nwokorie is stepping up to take the top job later this year.
“Nwokorie is a relatively recent recruit to the business, having served as a senior director at Apple Retail before joining late last year.
“Dr Martens remains an iconic brand and if the new boss is unable to fix the company’s problems it may be that an opportunistic predator comes along to take advantage.
“Key for Nwokorie will be returning the US business to growth and reigniting demand in this market – he will need to bring all of his experience to bear to revive the brand and restore Dr Martens’ fortunes.”
Hostmore / TGI Friday's
“Having operated under the TGI Friday’s brand in the UK for some time, Hostmore is now buying the global master franchise owner. It’s a bold deal given how Hostmore has struggled as a listed company and perhaps the last roll of the dice in terms of making the group a success.
“The deal would significantly increase Hostmore’s scale and give it a big presence in the US. It would also release Hostmore from the shackles of an existing franchise deal which is described as restrictive. That implies Hostmore will have more freedom to try and breathe more life into the dining group.
“It might need the biggest breath imaginable to inflate TGI Friday’s back to life. Arguably one of the most tired dining brands on the market, it’s a name that now has more connotations with ‘remember the days’ nostalgia TV shows looking at past lives rather than something that still holds its own against a growing number of modern chains.
“The latest trading update for the business being acquired is as appetising as a bowl of cold gravy. US stores have seen a disastrous first quarter due to reduced demand and a highly competitive market with rivals using big discounts to lure people through their doors.
“This poor situation is arguably reflected in the price being paid for the business – just 5.4 times 2023 EBITDA. Hostmore will have a lot of work to resurrect the brand. The big question for investors is whether it’s worth the effort.”
Moneysupermarket
“In this kind of environment there’s a real need for people to make savings where they can and Moneysupermarket is heavily plugged into that trend.
“The insurance sector is still the shining light for the business but there were reminders the comparison site space remains competitive – with this most clearly reflected in the travel sector.
“A lack of attractive deals in its money segment saw the business slip from where it was a year ago as customers have less incentive to switch.
“Energy is still immaterial compared to what it was historically. Despite the drop in energy costs from their highs two years ago, switching provider is unlikely to create a meaningful cut to household bills.
“Moneysupermarket’s diversified model is a strength and the company is still likely to be in strong demand as people look to make every penny count.”
These articles are for information purposes only and are not a personal recommendation or advice.
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- Wed, 24/04/2024 - 10:15