- Retail sales much worse than expected in December
- Birkenstock shares slide amid surprise loss and pricing plans
- Google plans $1bn investment in UK data centre
- Tata Steel puts 3,000 UK jobs at risk in plans for greener production
- Oil price pushed higher reflecting Middle East conflict
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“UK retail sales were significantly lower than expected, dropping 3.2% month-on-month in December, according to data from the ONS. This represents the largest monthly fall since January 2021 and is a clear signal of weakening sentiment. There is some distortion from November’s Black Friday, but the overall picture is one of consumer caution over the festive trading season. It seems as though trading was pulled forwards as shoppers sought bargains earlier, then held back in December. Creaking consumer behaviour showed up in weakness from sports equipment, games, toys, watches and jewellery, which has landed a particular blow for department store sales. Questions will now turn to how prolonged and protracted this cut to discretionary spending will be. There’s every chance that households will continue to look for ways to weather the macro-economic storm.
Birkenstock’s shares have suffered after its first results since the IPO. The group sounded the alarm on weaker consumer confidence, and posted an unexpected loss, reflecting the tough conditions as well as higher costs from ramping up a new German factory. One way Birkenstock plans to tackle elevated costs is to inflate its prices. This is a very fine tightrope to walk. As much as Birkenstock’s brand is well loved and reasonably resilient, the mid-value area of fashion isn’t immune to price sensitivity. Investors are clearly nervous about the group’s ability to keep margins inflated, without popping enthusiasm for the brand by pushing prices too far in the current environment.
Google’s planning to increase its already 7,000 strong British workforce by opening a billion-dollar UK data centre. The Hertfordshire site will be the engine behind Google’s British cloud and AI customers. This investment is a drop in the ocean for parent company Alphabet and is more significant for the PR efforts of UK plc. Encouraging tech investment has become a more difficult task in recent memory, and this vote of confidence will help efforts to overhaul the UK’s image, but it won’t be enough to change the tide.
Tata Steel is set to close loss-making clast furnaces in Port Talbot, putting 3,000 jobs at risk. The company is the area’s largest employer, so this news comes as a real blow for the local economy. Tata reached a £500m deal with the UK government last year to help fund its transition to electric arc furnace steelmaking. These are much greener but require significantly less labour. The direction of travel for steel production means sweeping changes are necessary, but this unfortunately carries the cost of painful changes to the workforce.
Continued conflict in the Middle East has helped carry the price of Brent crude higher. The barrel price is now within a whisker of $79 a barrel as supply anxiety and higher demand expectations have combined to push the price upwards.
