- FTSE 100 sheds five points at the open, following positive trading in US
- Richemont sees slowdown in sales as CEO position is reinstated
- London landlord, Land Securities, writes down value of its assets amid valuation slump
- Walmart upgrades full year expectations
- Chevron to divest UK North Sea assets after 55 years
- Oil to end the week higher
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“Although market enthusiasm has stalled slightly, the FSTE remains in a relatively bright mood overall. The follows the Dow touching an all-time high yesterday, as positive expectations for the Federal Reserve’s interest rate plans continue to buoy sentiment. The next catalyst for change will be more UK data, as company results season starts to fizzle out in earnest after today. With fewer corporate news stories in the diary, the macro picture will be the driving force over the coming weeks.
Luxury group and Cartier owner, Richemont, has reported a 2% increase in quarterly sales, with profits in line with expectations. The pace of revenue has slowed from previous periods, as the luxury sector at large continues to deal with a tapering of demand. The underlying picture at Richemont remains a healthy one, with operating margins of over 33% in its crucial jewellery business. High margins are one of luxury’s biggest draws, and also why investors tend to pay a premium for the highly regarded names in industry. Richemont in particular has over seven billion euros sitting on the balance sheet, which helps it to weather this period of consumer uncertainty. The slowdown is very much linked to the economic environment, and as and when the wheel starts to turn back into more prosperous territory, the strongest brands in this sector are primed to benefit. That will certainly be the hope of newly-announced CEO, Nicholas Bos. Richemont has re-established the role of chief executive after close to ten years, as the group looks to make sure it emerges from the market slowdown in as finer fashion as possible.
Real estate specialist, Land Securities Group, has reported a pre-tax loss of £341m as it writes down the value of its property portfolio. There has been a negative step change in market conditions and investor sentiment, which has led to a significant valuation deficit. For all the challenges, the group sees brighter spots on the horizon. The group’s said property valuations should move up from here, but this won’t be enough to boost earnings per share above last year’s levels.
Retail giant Walmart has increased its full year sales and profit forecasts, as its shares hit a record high. The chain is benefitting from more affluent households trading down, as households try to combat cost of living pressures. While the amount being spent per transaction has remained stable, the number of items making their way to the tills has increased. This volume-led strategy is favourable to relying on price. Ultimately, Walmart’s blockbuster results show, just how exposed middle market players are. The group’s betting that as inflation eases, customers will also be more likely to start splashing the cash on discretionary, non-food items, like electronics and clothing. This is partly where the forecast uplift has come from. The bigger question is how long richer customers will remain shopping at a lower price point – deciding there’s enough money for a new dress is an easier ask than convincing people to trade back up to branded butter if they’re satisfied with the cheaper option.
Chevron is selling its UK North Sea assets, after 55 years in the basin. The move comes as Chevron readies itself for the $53bn acquisition of Hess. The North Sea exit symbolises the need for many oil majors to find newer sources of oil and gas, as the North Sea basin has seen a drip feed of exits as fresher production assets are sought around the world.
Brent crude prices have held relatively steady, at around $83, and are set to end the week in the green. That’s reflecting constrained US inventories, and a more upbeat outlook for interest rate cuts, which would help boost demand for the black stuff.”
