August 29, 2017

Pegler’s market report – 29.08.17: Dixons Carphone and Provident Financial have a rollercoaster ride

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (29.08.17) Business section under the title Pegler’s Market Report:

Dixons Carphone and Provident Financial have a rollercoaster ride

Dixons Carphone was one of the casualties last week following its most recent profit warning. Many analysts believe that the lack of innovation from companies such as Apple and Samsung (with their top-of-the-market iPhone and Galaxy models) has reduced the need for consumers to purchase the latest smart phones, as the products are becoming increasingly indistinguishable from each other in a day to day capacity.

With no significant upgrade needed in order to access amenities such as 4G, and software updates freely available to older models, consumers are holding onto their phones for longer; especially given that FX fluctuations, which have made the relative price of handsets considerably more expensive for UK consumers.

The other big mover of last week was doorstep lender, Provident Financial, which had a rollercoaster ride and an initial catastrophic 66pc slide following its interim results. There was some recovery after the company announced a shake-up in management.

Fresh fears about Amazon’s assault on the grocery landscape has knocked shares in Britain’s food retailers after the online giant announced that it would start slashing prices at Whole Foods as soon as this week. Just two months ago Amazon announced its biggest ever takeover with an audacious £10.7bn swoop on upmarket grocery chain Whole Foods and the online giant is wasting no time in using the deal to propel its near-decade long push into groceries.

Costcutter, Britain’s second-largest chain of corner shops, has become the latest retailer to consider a possible deal in response to Tesco’s £3.7bn swoop on Booker. When Tesco announced its acquisition of Booker back in January, it took the entire market by surprise. Since then, businesses across the grocery and convenience sectors have been open to having discussions that would not have seemed imaginable just one year ago. It is not known yet whether Costcutter will be sold, or will be snapping up a rival.

Profits at Laura Ashley plummeted by more than 70pc as the retailer blamed the weakness of sterling for its troubles and scrapped its dividend. Sales were primarily affected by the closure of 22 concessions in Homebase following the takeover of the DIY chain by Australia’s Wesfarmers group.

The battle for control of upmarket cocktail chain Revolution Bars, which has a presence in Brighton, has intensified after pub chain Stonegate raised its offer and rival bidder Deltic said it was weighing a fresh approach. Stonegate has said its 203p per share offer for Revolution – which values the company at £101m and is up marginally on last month’s 200p offer – is now backed by the board. It also has the support of two of Revolution’s major institutional shareholders. Nightclub owner Deltic had tried to gate crash the party earlier this month by submitting a counter offer, which would have seen the two companies merge and remain listed.

By David Pegler, Brighton Capital Management