- Small rise for FTSE 100 in early trade as positivity wafts in from Wall Street.
- Brent Crude hovers above $76 a barrel, gaining back some ground.
- Marks and Spencer shares rise in early trade, while B&M falls back as festive figures revealed.
- Warhammer owners Games Workshop puts up a good festive fight.
- Fresh headaches for Boeing as faults found on inspected aircraft.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 benefitted from a small waft of the feelgood factor emanating from Wall Street in early trade, as investors hopes remain high that inflation will keep heading in the right direction. The speculation has fuelled the value of tech stocks once again, with Nvidia given another boost, sending it to an all-time high. Investors cheered as the chip maker revealed new desktop graphics processors, aimed at the video game market, which will be capable of exploiting AI innovations. The insatiable demand for all things AI continues unabated, even though longer-term the trajectory is hard to map. A drop in the oil price this week has added to hopes that price pressures on consumers will ease, as lower Brent crude prices would feed through to lighter transportation costs. However, despite the outlook of softening demand for oil globally, Brent Crude has gained ground and is now hovering above $76. With the Middle East situation so fragile, and risks of escalation still bubbling, upwards pressure has resumed, helping energy giants in early trade.
Festive retail round up
Marks and Spencer shares had another lift in early trade before retreating, as the retailer saw double digit sales growth over the key Christmas period. Their core shoppers are far more insulated from the cost-of-living crisis, helping them put the best foot forward in festive sales. According to Researcher NIQ, M&S’s food sales, on a value basis, rose 12.1% in the 12 weeks to the end of December. They attracted more shoppers to their stores in December, grabbing a bigger slice of the market. Almost 29% of households bought from M&S in December, up from 27% in the same period last year. There may be concern that hanging onto this new custom will be challenging as budgets are tightened in the months to come.
At the other end of the scale, stores that screamed value at shoppers proved the big draw this Christmas, with B&M European Value Retail releasing a sturdy set of numbers, enabling it to keep its full year profit guidance intact. It expected full year adjusted profit of £620-630 million up from the £573 million pounds it made in 2022/23.
However, sales growth did temper from 6.2% in the first half, and investors are clearly disappointed, with shares falling in early trade. While bargain hunting is a big driver for grocery items and other essentials, it appears that shoppers may be showing less appetite for goods they would like to have but don’t necessarily need. Nevertheless, the resilient results have given the company confidence to keep ploughing on with its store expansion programme, with 45 new UK shops set to be opened over the next two years.
With savvy shopping becoming a big trend, it’s not surprising that the British Retail Consortium has flagged a challenging year ahead for retailers. Consumers are ringfencing budgets for holidays and are buying less stuff. The potential for attacks in the Red Sea to delay shipments has again been flagged, which could prove another cost headache for retailers. As budgets are squeezed and the threat of recession hovers, the lipstick effect is taking hold, with shoppers still keen to find little treats for themselves or as presents, despite the tough economic climate. Demand for beauty products and personal care items boosted sales, as clothing and jewellery proved less popular.
Games Workshop puts up a good fight.
Games Workshop has put in a good fight amid the Christmas competition. The Warhammer owner revealed that revenue rose 11% in the 26 weeks to November 26 and festive sales were in line with expectations. It shows the benefit of being a big player in a niche industry, with fantasy fans seemingly undeterred by cost-of-living headwinds. The business may also be benefitting from a desire to staying in and find entertainment at home, rather than spending on nights out. However, the company has flagged challenging economic times, so there will be some concern sales may droop and investors appear cautious, with shares falling in early trade. Further ahead its tie-up with Amazon Prime will bring the world of Warhammer to the small screen, which has the potential to propel sales and give the brand a boost like Mattel saw with Barbie toy sales after the blockbuster hit. With screenwriters currently being hired to bring life to the Warhammer universe, Games Workshop’s fantasy worlds look set to reach a much wider audience of consumers.
Fresh headaches for Boeing
Boeing’s troubles have escalated after airlines undertaking inspections of their fleet found loose hardware on some 737 Max 9 aircraft. 171 planes were grounded for safety checks to be carried out, after a door plug, part of the fuselage, fell off an Alaskan Airlines flight. While it seems the faults can be remedied, this is turning out to be a public relations disaster for Boeing. It appears that despite pilots flagging issues with the original aircraft and requesting further maintenance, it was kept in the air, albeit on different routes. Shares have been in freefall since the incident occurred, falling another 8% as investors assess the long-term damage and what it could mean for the sales pipeline. The debacle is already set to have a knock-on effect on its airline partners. Ryanair has flagged that it expects to be 5-10 aircraft short in its fleet this summer because of delivery delays. This could mean less seats are available, and higher prices could be on the way as a result.
Boeing has called an all-staff meeting today amid the crisis, focusing on safety, cancelling a senior leaders retreat. With two fatal crashes a sombre reminder of the human cost of aircraft defects, Boeing will now have to cope with another potential loss of confidence among passengers and potential customers.”
