Parsley Box shares hit | Diageo margins up | Boohoo costs rise
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5pm: Boohoo down as miners rise
Blue chips fell after the pound rallied, while fashion retailer Boohoo slumped to a 14-month low following a warning that higher inflation would hurt margins.
The FTSE 100 closed down 21.74 points (0.31%) at 7,086.42 after having gained as much as 0.7% earlier in the session as the dollar earners in the index took a hit from sterling’s strong gains.
Sterling was last trading 0.31% stronger against the dollar at $1.3468, and gaining 0.47% on the euro at €1.1632.
Online retailer Boohoo dropped 15.1% after it warned that freight inflation in its supply chain and higher wages for workers would impact full-year profit margins (see below).
Virgin Money lost 4.13% after saying it would close almost a fifth of its branches and cut office space as customers increasingly move online during the pandemic.
The index was cushioned from a steeer fall by miners which tracked a jump in iron ore prices, driven by hopes of a recovery in Chinese demand. Anglo American was up 2.58%, BHP ahead by 1.42%, and Rio Tinto 1.92% firmer.
Scotch whisky maker Diageo rose 1.3% after it forecast a boost to operating margins on the back of higher spending on premium brands and at restaurants and bars (see below).
On aim shares in Scottish direct-to-consumer ready meals service Parsley Box plummeted by 38% or 37.6p to 61p after it said it had been hit by supply problems (see below).
11am: Economy grows
Figures released by the Office for National Statistics showed that the UK economy grew more than initially estimated in the second quarter, expanding by 5.5% between April and June on a quarterly basis, up from a preliminary estimate of 4.8% growth.
That left GDP 3.3% below pre-pandemic levels, up from a previous estimate of 4.4% below.
The ONS said that in output terms, the largest contributors to the increase were from wholesale and retail trade, accommodation and food service activities, education and human health, and social work activities.
9.30am: Diageo among early risers
Diageo was among the gainers, up 2.5% after the distiller said it made a strong start to financial 2022, with organic net sales momentum across all regions (see below).
Barratt Developments and British American Tobacco were among the worst performers, down 2.6% and 2.3% respectively as the stocks went ex-dividend.
AIM-quoted fashion retailers ASOS and Quiz were down 5.2% and 1.7% respectively in a negative read-across.
The FTSE 100 was up 38.3 points, or 0.5%, at 7,146.46.
7am: Parsley Box hit by supply disruption
Scottish direct-to-consumer ready meals service said it had been hit by supply problems.
The group, together with the wider retail sector, is experiencing labour issues throughout its supply chain and has been “significantly restricted” by seeing stock availability cut by half.
The board took the “difficult decision” to reduce investment in marketing and this is likely to continue until the expected short-term supply chain constraints recede.
As a consequence the group now expects full year revenue to be circa £25m, slightly ahead of last year, with a consequential impact on the group’s loss before tax. The group’s cash balance at 31 August 2021 was £5.7m.
The company said it has seen an 18% year on year revenue growth for the eight months to 31 August to £17.8m (2020: £15.1m). Products shipped also grew by 18% in the same period to 7.8 million units (2020: 6.6m).
The board said it is encouraged by the early signs from the Q3 product releases and will provide a further update ahead of the full year close.
Kevin Dorren, CEO, said: “Delivering our product innovation plan remains the focus for the business as we navigate our way through the widely reported supply chain disruption.
“The second half of the year has been further impacted as we took the disappointing decision to pull back on planned marketing investment. However, I, and the board, firmly believe that Parsley Box’s long term growth prospects are unchanged.”
7am: Boohoo sees rising costs
Online fashion retailer Boohoo warned today that rising costs in its supply chain and higher wages for its distribution centre workers would impact on full year profit margins.
The company said it doubled its market share in the UK and US since the start of the pandemic but profits plunged following heavy investment during the year.
New rules following Brexit also saw profit margins reduce from 57.8% to 53.6% due to the extra checks required at customs, the company said.
The company also revealed that it took a hit as the percentage of garments sent back has returned to pre-pandemic levels and the easing of lockdown restrictions in the period saw shoppers return to the high street.
But it is confident for the rest of the year, saying it expected to emerge from the pandemic in a far stronger position.
Sales rose 20% to £975.9 million in the six months to the end of August compared with a year earlier, but pre-tax profits dropped 64% to £24.6 million.
Full year 2021-22 adjusted EBITDA margins were now expected to be 9% to 9.5% compared to its previous guidance of 9.5% to 10%.
The group also raised its guidance for full year capital expenditure to £275m, from up to £250m previously.
It said it would open a new distribution centre in North America in 2023.
7am: Diageo margin boost
Johnnie Walker and Guinness owner Diageo said that its new financial year was off to a “strong start”.
The company said it was forecasting a boost to operating margins as customers opt for premium brands and spend more at restaurants and bars.
Recovery in Europe has been ahead of its own expectations, while in North America, despite supply constraints, the business has been “performing strongly”, the company said in a statement ahead of its annual general meeting.
Sales at bars and restaurants, hit by Covid-led restrictions last year, are recovering strongly as higher vaccination rates encourage more people to venture out.
Chief executive Ivan Menezes said: “We have made a strong start to fiscal 2022 as we benefit from resilience in the off-trade and continued recovery in the on-trade.
The company is also benefiting from customers trading up to more premium drinks and from a rise in sales through higher margin channels such as e-commerce, he added.
7am: Virgin shuts more branches
Virgin Money is closing a further 31 stores out of the 162 in its networks and will take a restructuring charge of about £25m in Q4. Twelve of the stores are in Scotland.
It also said it will have lower office space requirements, with infrastructure and office hubs re-purposed to fit new ways of working. After applying valuation adjustments and including other operating model changes, the group will incur a c.£20m restructuring charge in Q4.
US equity markets saw a mixed close, with the Dow Jones ending the trading session up 90 points or 0.26%. The S&P 500 was 0.16% higher whilst the Nasdaq closed lower, down 0.24%.
Stocks in the Asia-Pacific region were also mixed as China’s manufacturing Purchasing Managers’ Index for September came in at 49.6, below the 50 mark that separates growth from contraction.
China’s Shanghai Composite nevertheless gained 0.79%, while Hong Kong’s Hang Seng index dipped 0.73%
In Japan, the Nikkei 225 slipped 0.11% and South Korea’s Kospi rose 0.49%.