- FTSE opens lower amid lower volumes and ongoing uncertainty
- Mothercare shares fall 4% after warning more franchise stores could close
- Consumer confidence in the UK rises, raising optimism for Black Friday performance
- Brent crude reaches $81 a barrel after recent volatility
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“The FTSE 100 doesn’t seem to have that Friday feeling, opening lower. The Thanksgiving break in the US means volumes are thin on the ground, and at the same time, there isn’t a great deal of corporate or economic news to sway the index. Trading activity tends to wind down in December, and there may well be an element of wait-and-see coming from the city. The jury’s still out on whether a recession is coming next year, but everyone seems to agree that growth and consumer activity will be sluggish at best – meaning the FTSE could face an uphill battle in the short-term.
Mothercare is in need of some self-care, after warning more of its franchise stores could close. Tough trading conditions, especially in the Middle East, are causing problems for a company that’s already had to peddle extremely hard to stay afloat. The group’s turnover dropped to £29m in the first half, down from £38.5m last year – and is even further away from the £44.4m back in 2020. An area that needs a laser-like focus from management is the net debt pile, which stands at many times the amount of the group’s cash profits. There’s also a sizeable pension deficit to clear. For now, profits are being supported by deep cost cuts, but these can only go on for so long and won’t be enough in the long run. The shares have dropped another 4% in recognition of the hard work ahead for this well-loved brand.
The clouds are parting for consumer confidence in the UK. GfK’s consumer confidence indicator rose to -24 from -30 in November, beating expectations. Consumers seem to be feeling more upbeat about all areas, including the outlook for personal finance. The slowing down of inflation and growing hope for a kinder interest rate environment are likely all contributing to the improvement, which could spell good news for retailers over the important Black Friday period. That said, the mood music is souring for Amazon over this important time as industrial action over pay and conditions by warehouse staff could threaten performance, and will be something monitored closely by investors that are keen to see retail margins gain momentum. It shouldn’t be forgotten though that the consumer confidence figures are still firmly in negative territory – this is a step in the right direction but there’s a long way to go.
Brent crude is sitting at around $81 a barrel following volatility in recent sessions. Some pressure is stemming from a dispute within OPEC+ around output commitments, which is muddying the supply outlook.”
