- FTSE 100 gains on the open following positive economic data in the US
- WH Smith’s travel pivot continues to impress
- Superdry’s half year performance sees losses widen
- Oil price set to end the week 4% higher on bullish economic data and disruption
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
FTSE 100 rises ahead of US economic data and UK consumer confidence hits two year high
“The big names of the UK stock market have been lifted higher in the final trading session of the week. Stocks have been given a boost from better-than-expected economic data in the US yesterday. Our friends across the pond are seeing economic growth outstrip expectations, while also enjoying the fact that inflation pressures are reducing, according to the personal consumption expenditures index. There are still a lot of plates for the Federal Reserve to spin, and all eyes will now be on PCE numbers later today, which are a favoured inflation gauge.
The FTSE has also been lifted by news of UK consumer confidence hitting a two-year high. GfK’s consumer confidence index pushed to minus 19 in January, from minus 22. So while there’s still clearly further room for things to improve, the average consumer’s concerns are reducing as hopes for interest rate cuts and lower inflation trickle through. Retailers who have faced a tough Christmas will be hoping these better moods translate into improved spending.
WH Smith’s travel business delivers strong growth
WH Smith has quietly chipped away at its high street image and instead become a well-loved fixture at airports, train stations and motorway services. This move is paying dividends. Revenue in the travel business is up by double digits as airport numbers improve, and the group’s also benefitting from its locations in hospitals. The strategy involves opening stores in locations where people have little option but to splash the cash, often with a convenience tax added to the cost. Whether it’s a service station sandwich or book for your long flight, WH Smith is waiting to capture convenience cash.
WH Smith has its eyes firmly peeled on the horizon, with international expansion of the travel business, including in the US, offering up enormous potential.
The high street business rumbles on but is continuing to see declines and cost savings are still being targeted. This part of the business is no longer the headline though, and markets are wise to that fact.
Superdry’s challenges persist
The latest instalment of the Superdry saga isn’t a pretty one. Half year revenue fell over 23%, with the group laying the blame on an unseasonably warm December, highly competitive industry leading to discounts, as well as broader consumer weakness. The area of the market that Superdry is targeting is a particularly difficult point on the spectrum. It’s not high end enough to be considered luxury, and it’s not a bargain option either. There have been well-documented slip ups operationally too, including poorly managed inventory. The net effect is one of widening losses and a worrying debt pile. The group’s substantial physical footprint adds pressure for sales volumes to improve sooner rather than later. Superdry is famous for its outerwear and warmer clothes, so the recent cold snap has added a bit of warmth into numbers, but not enough to thaw remaining challenges.
Brent crude on track for 4% rise on bullish economic data
Hotter than expected GDP in the US has lit a fire under the oil price, with the price of Brent crude up around 4% in a week. The more bullish outlook for economic activity comes at the same time as continued disruption in the Red Sea, which raises questions about the possibility of supply disruption. All in all, this could make inflation reads slightly tricker next month, but as we know, the oil price can change at very short notice and will need monitoring closely.
