Market report

Festive boost for M&S and Tesco | Wood unit sale


5pm: London edges up

Despite a slew of upbeat trading statements, for the most part US and UK markets just haven’t been able shake off the doldrums today, says Danni Hewson, AJ Bell financial analyst.

“Whilst the FTSE 100 has remained fairly flat buoyed by banks salivating at the prospect of rate rise boons it’s only Wall Street’s Dow Jones that’s really taking the day in stride,” she said.

JD sports took the top spot on the list of FTSE 100 losers after it emerged that the company’s chairman had sold off more than half of his stake in the business. 

The FTSE 100 managed a final flourish to closed 12.13 points higher at 7,563.85.

See closing market report

10am: Gilbert clear to bid for River and Mercantile

Premier Miton has dropped its offer for River and Mercantile Group, leaving the field open for Martin Gilbert’s AssetCo to proceed with its rival offer which was launched last November.

AssetCo already owns a 5.8% stake in R&M and Mr Gilbert is its deputy chairman.

Premier Miton chief executive Mike O’Shea said: ‘We are most grateful to the board of RMG for their co-operation and assistance as we have assessed the merits of a possible transaction, especially so given the major changes ongoing in their business.”

Both bids were contingent on the sale of R&M’s fiduciary business to Schroders, which has since been successfully concluded.

An extension until 18 January was granted to both firms to decide whether to make an offer for the company.

9.30am: Market dips

The FTSE 100 defied expectations of a further lift-off by failing to build on yesterday’s rise and some bulllish updates from retailers. The index was down 14.52 points at 7,537.20.

“The FTSE 100 started Thursday a touch lower as investors turned their nose up at some mildly positive updates from the likes of Tesco, Marks & Spencer and Persimmon,” says AJ Bell investment director Russ Mould.

“The markets had a reminder of inflationary pressures yesterday afternoon as US inflation figures hit a 40-year high.

“This is clouding the outlook for many businesses. For Marks & Spencer it looks like it has been better to travel than arrive, with a really strong run for the shares brought to an end despite strong festive trading.

“The retail sector, so far at least, seems to have done well despite Omicron, although the likes of Marks & Spencer and the supermarkets are potential beneficiaries of the fact that, with Christmas parties cancelled, more of us were entertaining at home and treating ourselves to extras like sparkling wine and posh snacks.

“Despite Marks’ soggy share price, it’s still significant that its clothing and home business, long the ugly duckling of the group, is continuing to spread its wings having delivered growth for the second successive quarter. 

“Perhaps there is some disappointment that the company hasn’t served up another big upgrade today – though in fairness full-year guidance had been hiked twice already.”

8.15am: Vessels firm acquired

Partners Group, a global private markets firm, is acquiring North Star, an Aberdeen-based operator of specialised vessels, from Basalt Infrastructure Partners.

Full story here

7am: Strong Christmas for M&S


Marks & Spencer reported its highest ever Christmas food sales as more customers used the stores for their every day shopping.

Food has maintained its momentum, outperforming the market over both 12 and 24 months, it said in a trading update.

Chief executive Steve Rowe said trading across the group over the Christmas period has been strong, with Clothing & Home delivering growth for the second successive quarter.

“The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance,” he said.

Food sales increased 12.4%, with sales excluding hospitality and franchise up 16.4%. Retail parks and Simply Food stores continued to outperform. Although not included in these numbers, M&S products performed strongly on, representing c.30% of baskets in December.

Clothing & Home sales increased 3.2%. Full price sales grew by 45%, reducing the amount of product sold on promotion by 66% and stock into sale by 21% compared to 2019/20. Online sales continued to be strong, with growth of 50.8% supported by substantial expansion of in-store fulfilment. Store sales were down 10.8% on 2019/20 with retail parks up, continuing to outperform stores in city centres.

International sales increased 5.1%, with online sales more than doubling. Performance was driven by Clothing & Home growth in the Republic of Ireland and key markets such as India after Covid related restrictions were eased. In addition, there was strong growth through online marketplaces and in franchise shipments to the Middle East.

7am: Tesco up at Christmas

Tesco reported a 2.7% rise in like-for-like sales for its core UK and Ireland grocery business during the six weeks to 8 January compared to the same period last year.

It raised its profit outlook for the second time in four months as a result of the performance, saying it now expected to deliver retail operating profits for the year to February slightly above the top-end of its previous £2.5bn-2.6bn range.

Edinburgh-based Tesco Bank saw sales up 33.6%, driven by the full ownership of Tesco Underwriting this year. Excluding Tesco Underwriting, sales declined 5.9% due to reduced income from lower unsecured lending balances YoY.

7am: Wood to sell consulting business

Wood Group says that following a review announced in November it will sell Built Environment business and this process is underway. A sales agreement is expected to be announced in Q2.

The group said it expects activity levels to improve in 2022 across the company.

“We have seen good momentum in order in-take in the fourth quarter of 2021, including an improvement in Projects. We expect our order book at 31 December 2021 to be significantly higher than 31 December 2020 with growth in all business units. Growth is most notable across conventional energy and built environment.”

7am: Persimmon hires CFO

House builder Persimmon has appointed Jason Windsor as chief financial officer, joining from Aviva.

Full story here

7am: Asos moves to main market

Asos, the online fashion retailer, will move from the Alternative Investment Market to the London Stock Exchange’s main list, as it reported a strengthened sales performance despite “challenging” market conditions.

Group revenues in the four months to 31 December were £1.39bn, a 2% improvement on the same period a year earlier, or a 5% rise on a constant currency basis.

Within that, sales in the UK – Asos’s biggest market – rose 13% to £645.2m. UK sales were ahead of consensus.

7am: Mitchells & Butlers falls

Pub operator Mitchells & Butlers said its sales during the Christmas period fell as the Omicron Covid-19 variant made people cautious about socialising.

The company, which has about 1,700 pubs in the UK, said like-for-like sales in the most recent four weeks were down 10.2%.

M&B also said apart from fewer customers visiting its pubs, it also faced disruption from staff members missing work to isolate themselves.

Global markets

London is expected to consolidate on this week’s gains which saw the FTSE 100 close to its highest point for almost two years, despite inflationary pressures.

Asian shares were dragged lower by weakness in Chinese economic data although investors seemed relieved that US inflation at 7% was not hot enough to force even faster monetary tightening by the Federal Reserve.

The Fed chairman Jerome Powell reiterated that despite inflation hitting its highest for 40 years it was running “above target” and that the US economy no longer needed “or wants the very accommodative policies we have had in place.”

However, fears that the surge would mean the Fed accelerating its tightening programme were not realised and US markets eventually closed higher.

Markets in the US will be keeping one eye on Boris Johnson following his House of Commons statement yesterday, while updates were due from a number of key retailers.

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