January 30, 2018
Pegler’s market report – 30.01.18: Some bright sparks emerge
As published in the Brighton Argus (30.01.18) Business section under the title Pegler’s Market Report:
Some bright sparks emerge
UK manufacturers appear to be doing well, but they continue to lag their peers overseas, suggesting that we will remain one of the worst-performing advanced economies this year.
As previous reported, UK retailers are having a tough start to 2018. Retailers reported weaker-than-expected sales in January, with fewer saying sales were ahead of the same period in 2017 than previous research in December. Economists said the research appears to confirm views that 2018 will be weaker than 2017.
Next was one of the retailers that bucked the trend – its clothing range has become cheaper than the retail sector’s average and its directory offering, which now accounts for 40pc of sales and 55pc of its earnings, should make the blue-chip retailer well-placed to benefit from more shoppers shunning the high street.
Unemployment remained steady at a record low of 4.3% in the three months to November, while the number of people in work increased 102,000 to 32.2m – a new high.
Meanwhile, average weekly earnings were 2.5% higher than a year ago, including bonuses, and 2.4% higher excluding bonuses. This compares with 2.5% and 2.3% respectively during the previous three-month period.
However, with inflation at 3%, wages continue to lose value in real terms. The ONS said real earnings fell by 0.2% over the past year, including bonuses, and by 0.5% excluding bonuses.
More Britons are buying cheap pub meals and beer, which has been good news for Wetherspoons, which increased its profits outlook last week. Like-for-like growth in the 12 weeks to January increased by 6% and total sales were up 4.3%. As a result, the pub operator said underlying profit before tax in its financial year to date would be “slightly” ahead of its expectations.
Drink’s giant, Diageo, reported better-than-expected sales for the six months to the end of December, while warning that currency movements would hit growth over the full financial year. Organic growth was reported for all the major regions. Sales of Johnnie Walker whisky grew 5% in North America while net sales of tequila grew 43%, driven by strong double-digit growth of Don Julio in Mexico and the US. In Europe, growth was primarily driven by gin, with Tanqueray gaining share and Gordon’s benefiting from the launch of its Pink variant. The half-year dividend increased 5% to 24.9p.
Finally, Donald Trump declared America “open for business” at Davos as he touted his tax cuts and regulation slashing to get companies investing in the country. In a speech delivered in more measured tones than usual, the US president attempted to reassure the crowd by saying his “America first” agenda did not mean “America alone”. However the president did not recoil from his tough stance on trade malpractice, saying America will “no longer turn a blind eye” to countries that unfairly undercut it.
By David Pegler, Brighton Capital Management