October 25, 2016

Pegler’s market report – 25.10.16: Lidl faces slowing sales at its older shops

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (25.10.16) Business on page 21 under the title Pegler’s Market Report:

Lidl faces slowing sales at its older shops

Lidl’s rampant growth in the UK is stalling as sales have slumped by around 5pc at the discounters’ shops that have been open for more than a year, according to a fresh analysis of industry figures. The slowing sales raise fresh speculation about the reasons for the abrupt departure of Lidl’s former chief executive last month. Earlier this week, industry data revealed that Lidl and its German discounter peer Aldi were continuing to grow market share by adding around 60 to 70 stores a year.

The UK’s public-sector finances deteriorated significantly in September, largely thanks to a step-up in   Government spending and a fall in income from corporation tax. The state had to borrow £10.6bn in September because the amount of money it generated through taxes and other means was less than it needed. This was an increase of £1.3bn, or 14.5pc, compared with September 2015.

M&G Investments, a unit of insurer Prudential, is set to lift the suspension of its M&G Property Portfolio. M&G was one of seven fund managers to put a temporary freeze on trading in UK commercial property funds, as retail investors fled in the aftermath of Britain’s vote to leave the European Union. Most of the funds have since reopened. M&G said 58 properties have been sold, exchanged or put under offer for a total 718 million pounds ($877.83m). M&G froze the funds on July 5. It also confirmed it removed a fair value adjustment applied on July 1. Many funds, including those that remained open, applied fair value discounts following the Brexit vote.

Shares in Intercontinental Hotels (IHG) struggled, after third quarter room revenue slowed. IHG, one of the hotel industry heavyweights behind Holiday Inn, blamed terror attacks, which contributed to a drop-in sales growth between July and September while revealing that Brexit’s impact on sterling could also weigh on profits. IHG’s revenues-per-available-room, a measure of business performance used in the hotel industry, increased by just 1.3pc in the three months to September 30. The group has hotels in nearly 100 countries including Britain, the US and China.

Sales at Burberry’s UK stores jumped 30% as overseas visitors snapped up luxury goods due to the weakness of the pound. That was one of the few bright spots when the coats-to-cashmere-scarves retailer published a trading update for the six months to the end of September. There has been speculation that Burberry may merge with its US peer, Coach.

Nationwide’s house price index has recorded steady gains over the past few months, suggesting the Brexit vote has done little to dampen the property market. Last week, industry data showed house prices rose by 8.4% in the year to August and by 1.3% month-on-month.

By David Pegler, Brighton Capital Management