July 25, 2017

Pegler’s market report – 25.07.17: Investors relatively upbeat on retailers

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (25.07.17) Business section under the title Pegler’s Market Report:

Investors relatively upbeat on retailers

Retailers enjoyed a boost from the rebound in retail sales in June. This news adds to a renewed sense of optimism on the UK’s economic prospects. Spending seems to be holding up despite falling real wages, and if the sterling-driven spike in inflation is finally receding, some commentators now believe we could see a stronger contribution from the UK consumer in the second half of the year.

Month-on-month retail sales rose by 0.6pc in June, a slightly better-than-expected result for retailers, according to the Office for National Statistics. The figures will be a relief for the high street after sales tumbled 1.2pc in May. The ONS said that good weather last month had helped the rebound.

Sales at Premier Foods fell by more than 3pc in the first quarter as the Mr Kipling maker suffered a slowdown in its grocery business. The company said sales of groceries and desserts, which were hit by a reduction in multi-buy promotions and a warmer June, offset good performance in its “sweet treats” range. Premier said total group sales were down 3.1pc in the 13 weeks to July, while grocery sales fell 5.6pc. In its “sweet treats” division, Cadbury cakes and a return of Mr Kipling to growth sent sales up 3.8pc.

Kraft Heinz may have stepped back from its bid approach but Unilever knows it cannot relax and investors expect it to raise its game. Unilever said that it has had a “substantial” step-up in first-half profits as it attempts to win over shareholders to its long-term strategy. Fortunately, Unilever’s strength in emerging markets is allowing it to push revenues forward through pricing gains. Kraft launched a £115bn takeover bid in February which was later withdrawn but some analysts put a high probability on the US company returning with a more aggressive attempt.

A dip in sales in the Middle East sent Mothercare’s shares down as overseas performance continued to mar the baby and child retailer’s turnaround in the UK. International sales were down 8.3pc in constant currency over the first quarter, a deeper fall than analysts had expected, with the firm blaming “continued weakness” in trading in the Gulf. Senior management is midway through a turnaround programme at the company to shrink its UK estate, refresh its remaining stores and invest in e-retailing.

Bitcoin is trading near the all-time highs despite the civil war that could see it split into two entities in less than two weeks. The cryptocurrency’s value has risen 182.5pc in this year alone. The US decision to close a host of dark web marketplaces removes one source of demand, but for now, as long as Chinese speculators remain able to use the cryptocurrency to move assets out of the country, the bulls remain in charge.

By David Pegler, Brighton Capital Management