Unilever / Tesco, WH Smith & Sports Direct

“The FTSE 100 fell 0.7% at the market open with weakness in financial and mining stocks. Gold miners were the exception with the precious metal price staging a small recovery,” says AJ Bell investment director Russ Mould.

“Pricing power is a sign of a great business and that’s exactly why you should look at Unilever’s spat with Tesco over attempts to push up the price of Marmite and PG Tips. Unilever’s latest figures reported today show 3.2% underlying sales growth for its past quarter and it is price, not volume that is driving this performance. It doesn’t need to shift more goods to drive its sales; it simply charges more for them because it knows the public likes the products and people won’t suddenly stop buying them if they become a little bit more expensive. In the Tesco case, Unilever wants to push up prices because weaker sterling is pushing up costs – so Unilever naturally seeks to pass on this cost to the consumer. I’d expect this trend to gather pace with other consumer goods sellers over the coming weeks.

WH Smith’s core product base of magazines and newspapers is in structural decline, its stores are generally a mess and there is growing competition from lower-cost sellers for many other parts of its business like greetings cards and stationery. So just how does WH Smith keep growing profit? It is ripping costs out of the high street shops and investing heavily in the travel arm which includes the shops at train stations and airports. It is also highly cash generative, having given shareholders £413m in dividends over the past 11 years which is nearly a quarter of what the business is worth today. It shows investors shouldn’t be quick to dismiss what may initially seem like a flagging business.

Sports Direct must spend a lot of money on oil lubricant given how fast its head office doors are revolving. Out goes yet another member of the management team in what has to be one of the biggest corporate shake-ups in years. Acting chief financial officer Matt Pearson has quit after 16 months in the job. The demise of the Sports Direct has been remarkable. Having once been a stock market darling, the shares have fallen by 65% since August 2015.”

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