FTSE 100 Live: Retail sales rise but consumer confidence hits record low, THG jumps on takeover interest

·9 min read
 (Evening Standard)
(Evening Standard)

A mixed picture on spending emerged today as better-than-expected retail sales figures offset a record low consumer confidence figure.

Retail sales volumes rose 1.4% in April, which was better than the 0.2% decline forecast and the 1.2% fall seen the previous month.

Meanwhile, the latest consumer confidence score from GfK fell two points to minus 40, which is the lowest since records began in 1974 as household worry about rising energy, food and fuel costs.

FTSE 100 Live Friday

  • Retail sales post unexpected rise in April

  • Hut Group bid interest boosts shares

  • FTSE 100 recovers yesterday’s big losses

Footlocker sales flat line

13:22 , Mark Banham

US trainer retailer Footlocker, which has 59 shops in the UK, has reported “solid” first quarter results butbeen up against “tough comparisons of fiscal stimulus and historically-low promotions from last year”.

Total sales at the trainer and sportswear outlet increased 1%. However, comparable store sales decreased by 1.9% reflecting the struggles for footfall on the high street.

The company reported net income of $133 million (£107 million), or $1.37 per share, for the 13 weeks ended April 30, 2022, compared with net income of $202 million, or $1.93 per share, for the same period last year.

Chinese slowdown dents Richemont shares

13:06 , Mark Banham

Sales and profits have jumped at luxury group Richemont as millennials and Gen-Z get into high-end watches.

Chairman Johann Rupert noted the “increased appeal of high-quality watches” to both demographics in the Swiss group’s annual results, saying it was a “positive trend” for the future. Richemont owns luxury watch brands such as Jaeger-LeCoultre and IWC, advertised by Formula 1 star Lewis Hamilton.

Announcing results for the 12 months to 31 March, Richemont, which also owns brands including Cartier and Montblanc, said sales jumped 46% to reach €19.2 billion (£16.3 billion) while operating profit more than doubled to €3.4 billion.

Double digit growth was led by the Americas (79%). Sales in Asia Pacific rose by 32%, with mainland China sales growing by 20% compared to the prior year.

Shares in Richemont dropped by more than 10% in early trading, with investors spooked by the relatively slow growth in China.

Read the full story.

Record profits at Nationwide

12:34 , Simon English

Nationwide Building Society today recorded its best results since it was founded in 1884 and insists it is in a strong position to help members struggling with the cost of living.

A booming property market helped profits for the year more than double to £1.6 billion. Outgoing CEO Joe Garner puts that leap partly down to a decision to go back into 90% mortgages back in June 2020 as Covid raged.

Read more.

M&C Saatchi to sell itself to Next Fifteen

12:07 , Simon English

M&C Saatchi has landed a £310 million takeover bid from rival Next Fifteen today, escaping an unwelcome rival offer from its own deputy chairman.

Vin Murria, the largest shareholder, has been pursuing the ad firm for months.

But it has been clear from the start that the rest of the board including CEO Moray MacLennan did not welcome her approaches.

Today’s deal with Next Fifteen it pitched at 247.2p, of which the cash element is £40 million. That is well above her 207p offer and nearly 50% above where the stock was yesterday. The shares jumped 58p to 223p, still below the offer, indicating some concern that Murria could yet employ her 12% stake to be disruptive.

Read the full story.

Rates outlook lifts NatWest, FTSE 100 rebounds

10:32 , Graeme Evans

The storm clouds over the UK economy are failing to dampen enthusiasm towards banking stocks after NatWest got another broker upgrade today.

Investec analyst Ian Gordon regards the state-backed lender as an attractive play on rising interest rates, triggering a 10p rise in his price target to 245p a share. Low levels of unemployment and the prospect of share buybacks add to his optimism.

The lender, which is run by Alison Rose, is also the top domestic banking pick for UBS. Its analyst Jason Napier expects loan losses to be better than feared, leading to a re-rating once investor confidence around the economic outlook improves.

NatWest shares rose 3.7p to 212.8p as the wider London market finished another volatile week on the front foot, with the FTSE 100 index 122.23 points higher at 7424.97. The improvement puts back almost all the losses seen yesterday, when recession nerves were fuelled by weak updates from US retail giants Target and Walmart.

Today’s mood was helped by support for China’s Covid-hit economy after its central bank reduced a key lending rate. The region’s markets benefited and Asia-focused insurer Prudential topped London’s risers board with a gain of 5% or 51.8p to 1029p.

China’s move also boosted confidence in the mining sector as Glencore and Anglo American both gained 2%. Royal Mail, whose valuation fell below £3 billion yesterday after sliding 12% in the wake of annual results, improved 4% or 12.6p to 312.6p.

The FTSE 250 index climbed 1.5% or 310.50 points to 19,999.52, led by recoveries of 9% and 6% respectively for cyber security firm Darktrace and developer Countryside Partnerships. Luxury car maker Aston Martin Lagonda rose 21.4p to 699.4p.

Retail sales volumes up 1.4% in April

09:07 , Graeme Evans

Today’s unexpected rise in retail sales for April means the UK economy may have a little more momentum than previously thought.

The broad-based 1.4% month-on-month rise in volumes was the first improvement in three months and left sales 0.1% lower than where they were at the start of this year.

Capital Economics believes the low unemployment rate and savings built up during the pandemic may offer some protection at a time of economic uncertainty.

Its economist Nicholas Farr added: “The signs of resilience in the retail sales data are encouraging and there are several reasons to think low confidence will not weigh on spending as much as in the past.”

The consultancy continues to believe that the Bank of England will have to raise rates further than most expect, to 3% next year.

FTSE 100 and miners rally, Royal Mail up 5%

08:53 , Graeme Evans

The FTSE 100 index is up 1.35% or 95.70 points to 7398.44, meaning the top flight has recovered all but 40 points of yesterday’s losses.

The improvement caps another volatile week for global markets after updates from US-based retailers Target and Walmart fuelled recession fears and traders continued to forecast the need for much higher interest rates.

Miners including Anglo American and Glencore were 2% stronger after China’s central bank cut a key lending rate today, while there was a 5% rebound for Royal Mail after its fall of 12% on the back of Thursday’s annual results.

The FTSE 250 index climbed 1% or 210.23 points to 19,899.25, led by a 5% recovery for cyber security firm Darktrace and 3% gain for publisher Future.

THG shares up 24% after bid interest

08:19 , Graeme Evans

Shares in Hut Group business THG are up 24% at 144p after two potential bidders were revealed last night, including property billionaire and one-time Chelsea bidder Nick Candy.

The other approach is from a consortium led by Belerion Capital Group, but its proposal valuing the e-commerce company at 170p a share or just over £2 billion has already been rejected by the THG board.

Founder and chief executive Matt Moulding floated THG in 2020 and shares spent their first year consistently trading above 600p. They were at 80p in early March and stood at 116p prior to last night’s announcements.

Analysts at Liberum believe the shares are highly undervalued, based on a price target of 700p.

They said today: “A bidder could take the company private and look to later relist in the US, where such tech companies receive much greater appreciation from investors.

“The three key THG businesses – Beauty, Nutrition and Ingenuity - combined should generate over £2 billion in sales in 2022, and if separated out, would be highly valued strategic assets in their own right which should underpin the valuation.”

Consumer confidence at record low - GfK

07:59 , Graeme Evans

GfK’s consumer confidence score of minus 40 is a record low for the monthly barometer, weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy or the Covid shutdown.

Consumer pessimism is most evident in depressed sub-measures on the general economy, which are at minus 63 for the past year and minus 56 for the coming year. GfK’s major purchase index also decreased for each of the past six months and is currently at minus 35.

The readings, which are being driven by inflation at a 40-year high amid soaring food and fuel bills, come despite a 50-year low for UK unemployment with vacancies outnumbering job seekers for the first time.

GfK client strategy director Joe Staton said: “The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.”

FTSE 100 higher, S&P 500 near bear market

07:34 , Graeme Evans

Traders are expecting a positive session in Europe after Asian markets rallied in the wake of further support for China’s Covid-hit economy.

The country’s central bank cut its mortgage reference rate for the second time this year, a move that was followed by gains of more than 1% for stock markets in the region.

CMC Markets expects the FTSE 100 index to open 78 points higher at 7380, putting back some of the 135 points loss seen on Thursday after weak updates from retailers including Target and Walmart fuelled global recession fears.

US future markets also point to a positive start, which means the S&P 500 may avoid bear market territory after yesterday falling 0.6% to the brink of a 20% drop from its all-time high seen in January.

Unless there’s a major improvement today, the S&P 500 will decline for the seventh consecutive week for the first time since 2001.

Brent crude oil prices, meanwhile, are little changed over the week at just under $112 a barrel and Bitcoin remains close to the $30,000 mark after heavy falls in cryptocurrency markets last week.

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