Disappointing factory data from across the world sent stock markets down yesterday. Figures showed that American manufacturing was at its weakest in a decade amid the trade war with China. Activity in factories in the United States contracted for a second consecutive month in September. In Britain the sector recorded its fifth consecutive month of falling output, the longest run since 2009. Activity in the eurozone contracted further, to its weakest since October 2012, and in Asia there also were declines.
The boss of Ryanair Holdings (RYA) believes that the package holiday market and the model of the traditional tour operators are finished after the collapse of Thomas Cook. Michael O’Leary, chief executive of Europe’s largest short-haul airline, said at a conference in London: “The package market I think is screwed. It’s over.” He likened the decline of tour operators to “whoever was making shoes for horses” before the motor car replaced horse-drawn carriages. “There were some good, well-managed horseshoe companies, but ultimately they went the same way. That will happen with tour operators here in Europe,” he said.
The chief executive of J Sainsbury’s Argos business, who had been tipped as a frontrunner to become the supermarket group’s next boss, has been recruited by WPP (WPP). John Rogers, 51, will join the world’s largest advertising group as chief financial officer early next year, replacing Paul Richardson, 61, who is retiring from the company. Mr Rogers had been seen by some analysts as a likely successor to Mike Coupe, 59, chief executive of Sainsbury’s. He has held several senior roles at the group, including that of chief financial officer between 2010 and 2016. At Argos, he has overseen the transformation of more stores to a digital format, allowing customers to order via tablets instead of catalogues.
A slowdown in growth at Greggs (GRG) triggered a sell-off in its shares yesterday, despite the bakery chain performing well thanks to longer trading hours and new delivery services. Greggs said that like-for-like sales in company-managed shops had increased by 7.4% year-on-year in the 13 weeks to September 28, down from 10.5% during the first half of the year. It reiterated the outlook given at its half-year results in July, when it said that tougher comparatives in the second half of the year would moderate its growth.
The British division of Ferguson (FERG) is being readied for flotation in London with a 6% jump in trading profits. Wolseley UK is being split from its United States-focused parent, which has been under pressure to acquire a better rating with investors that believe valuations have been depressed by the performance of the struggling British business. Operating profits in Wolseley UK were nearer £9 million after one-off items connected with its continuing restructuring and the £9 million cost of bringing the company’s domicile back from Switzerland to London.
The £90 million takeover of Footasylum (FOOT) will not be bad for consumers, JD Sports Fashion (JD.) has insisted in response to a review of the deal by the Competition and Markets Authority. The watchdog said that Britain’s biggest sportswear retailer had failed to address its concerns that the takeover, announced in March, could be bad for shoppers. Peter Cowgill, 66, chairman of JD Sports, said that it “will not result in any price increases or a reduction in product ranges or service quality”.
Hargreaves Lansdown (HL.) reputation could still be damaged by the implosion of Neil Woodford’s Equity Income Fund, according to analysts at Credit Suisse. At the end of last year, its stake in the fund amounted to 31% of its total value and Hargreaves removed Woodford from its best-buy list only after the fund’s suspension. Analysts at the Swiss bank gave the stock an “underperform” rating yesterday, and added: “We find Hargreaves’ premium valuation difficult to support in the face of near-term revenue and earnings growth headwinds.” Panmure Gordon, the broker, said: “You could be forgiven for believing that there was no future. But the pressures are not new, nor necessarily accelerating.”
Reckitt Benckiser Group (RB.) dropped amid bearish analyst previews of its third-quarter results due later in the month. On Monday, there were also downbeat notes from Morgan Stanley and JP Morgan Chase. Jefferies said that all eyes would be on Laxman Narasimhan, 52, the new chief executive, to offer solutions, but added that it expected no announcements of substance before the fourth quarter. The company’s Durex condoms brand is under particular pressure in China from competition from Okamoto, a Japanese rival. Analysts at Deutsche Bank cut their price target from £77.50 to £75, predicting another “uninspiring quarter”.
Burford Capital (BUR) rose to 838p. Analysts at Peel Hunt recommended that investors buy the shares, noting that “even if Burford does obtain an official investigation that finds evidence of wrongdoing, the bigger issue is why the share price has not recovered. Muddy Waters had some fair points to make, but not such as to affect materially Burford’s fundamental value.”
Boohoo.com (BOO) has a lot to gain from the announcement of Forever 21, its American fast-fashion retail rival, that it will be closing 350 shops, analysts at Jefferies said. If Boohoo can steal even 5% of global market share, it will gain $40 million, they claimed.
Brexit uncertainty and record temperatures over the August bank holiday weekend have hit sales at SCS Group (SCS). Shares fell yesterday after it reported more challenging trading conditions in the past two months. The chain has suffered as the housing market has slowed, knocking spending on big-ticket items such as furniture. Analysts at Peel Hunt said: “August started well, but the bank holiday was a horror. More recently, things have picked up a bit, but in general industry-wide nerves are winning the day.” SCS said that it was on the hunt for acquisitions after its bid to buy Sofa.com failed and Sports Direct swooped in.
Tempus – Beazley (BEZ): Avoid. Diversified and efficient insurer, but operating in markets that at present are unattractive and risky
Tempus – Keywords Studios (KWS): Avoid. High-growth company whose valuation is a put-off
