Thur City brief: Greece, Diageo, Debenhams
Greece returned to haunt the market and put a cap on yesterday’s surge in stocks. The blue-chip FTSE100 initially rose to an all-time high of 7,119.35 points but then edged back and closed down 0.5% at 7,060.45 points.
Traders were cautious after Athens made an informal approach to the International Monetary Fund about delaying €1bn in loan repayments due next month, only to learn that rescheduling was not possible.
Diageo fell 3.6% after reporting lower quarterly sales, a much worse result than the small increase analysts had expected, as the drinks group blamed currency headwinds in Latin America and tough comparatives in the UK.
UK housebuilder Persimmon was also sold after saying that despite an “encouraging start” to 2015, political uncertainty ahead of the elections next month meant it is increasingly difficult to secure planning consents for sites in the land market.
Debenhams was up 6.7% or 5.3p on its latest figures to 85p, although Paul Thomas of the retail consultants Retail Remedy, said there were obstacles ahead. He said: “The lukewarm performance is no worse than that of the other grande dame of the British High Street, M&S.
“But unlike its rival, it has no trump card – and no powerful food business to fall back on.
“Debenhams has become highly reliant on promotions to drive sales – and while this price cutting has helped it boost sales volumes, its profit margin has stagnated all year.
“Its flagship locations have been made to look fresh and compelling, but many of its older stores are confused and tired.
“Debenhams has finally caught up with the pack with its online offering, and it has made respectable inroads into the fast fashion market – with its cheaper ranges managing to appeal to younger buyers.
“Its reputation for decent quality helps it stand out from some high street rivals, but its foray into sportswear seems Quixotic when seen against the all-consuming momentum of Sports Direct.
“As a venerable high street brand, Debenhams is far too old to be having a mid-life crisis. But it is clearly having to do some painful soul-searching – should it stick with the middle tier market it knows best, or ramp up the high volume, but fickle, fast fashion lines?
“It hasn’t lost its way, but its path is strewn with an ever-growing number of strong rivals.”