John Lewis Partnership mulls ‘prudent’ bonus freeze. The partnership behind John Lewis and Waitrose has warned of a potential staff bonus freeze for the first time since 1953 amid “unusual” levels of volatility in the retail market. Despite a steady Christmas trading period, where gross sales rose 1.4 per cent to £2.2 billion over the seven weeks to January 5, John Lewis Partnership said it continued to expect full-year total profits to be “substantially lower” this year. The declines were driven by slower sales growth over the year, margin pressure and higher costs, mostly investment in its IT systems, it said. The partnership said it had the financial strength and flexibility to pay a “modest bonus” this year, “without impacting our ambitious investment programme”, but added: “The board will need to consider in March, following the usual process, whether payment of a bonus is prudent in light of the business and economic prospects at that time.”
Marks & Spencer cheers City with better sales than expected. Marks & Spencer Group (MKS) had no shocks in store for the City this morning with a Christmas and third-quarter performance that was slightly ahead of expectations. The household British retailer said its turnaround was “exactly where we planned it to be at this stage” even as it reported falling sales across its food and clothing and home divisions. It said that UK food like-for-like sales were down 2.1% and its comparable clothing and home sales fell 2.4%. The retailer’s total like-for-like sales were down 2.2% in the 13 weeks to December 29. The City, however, had expected sales to fall by as much as 2.5% to 3%. M&S has also maintained its full-year profit guidance. Steve Rowe, chief executive, said that it had been a “very challenging” third quarter, particularly in November when footfall to its shops and traffic to its website fell. He said, however, that he was pleased with how the group had performed with 25% less stock going into the Christmas sale. “There is still a lot to do but we are exactly where we expected to be at this point,” he said.
Tesco’s Christmas sales beat expectations. Tesco (TSCO) enjoyed its best Christmas sales growth in almost a decade, boasting a performance ahead of City forecasts. Britain’s biggest retailer posted a 2.2% rise in like-for-like sales in its core Tesco business in the UK in the six weeks to January 5, its fourth consecutive annual rise in festive sales. The figure beat a company-compiled analyst forecast range of 1 per cent to 1.5%. Dave Lewis, its chief executive, who has been leading the company’s turnaround for the past four years, said that it had “delivered significant improvements in our competitive offer and this is reflected in a very strong Christmas performance, which was ahead of the market. We have more to do everywhere but remain bang on track to deliver our plans for the year and as we enter our centenary we are in a strong position.”
Professional jobs market stagnant without Brexit clarity, says Robert Walters. Hiring activity for professionals such as lawyers, accountants and IT workers in Britain is stagnant and could get worse if politicians do not deliver clarity on Britain’s departure from the European Union soon, a leading recruitment consultancy has warned. Robert Walters (RWA), one of Britain’s largest search firms, said that workers trying to move jobs and businesses trying to release capital to bring in new teams of staff had been affected by uncertainty as a result of Brexit. It said that it was continuing to reduce its own exposure to the nation as jobs growth “lies elsewhere” such as in France, Germany and Japan. “We have experience of dealing with extremely difficult situations,” Robert Walters, founder and chief executive of the firm, said. “We have flexibility and very limited exposure to the UK now. If we do need to downsize or reallocate our people into growth markets, we can do that.”
Debenhams to seek new funding after sales fall. Sales have fallen again at Debenhams (DEB) and the department store said that it could seek “new sources of funding” as part of a wider refinancing of its debt before a deadline next year. The struggling chain said that its overall like-for-like sales fell 3.4% in the six weeks to January 5 and its UK business declined by 3.6%, which was slightly worse than the market expected. Over the quarter as a whole there was an even steeper drop with UK comparable sales falling by 6.2% and international sales down 3.5%. The only bright spot was its online business, where sales rose by 4.6%. In an attempt to try to improve its performance Debenhams said that it would slash another £30 million of costs to takes its total cost savings to £80 million. It has also begun discussions with its lenders about refinancing about £500 million of debt and said that it could seek to “bring new sources of funding into the business”.
Standard Life in Virgin deal. CYBG (CYBG), the group that owns Virgin Money, Yorkshire Bank and Clydesdale Bank, has agreed a £40 million tie-up with Standard Life Aberdeen (SLA), to try to increase its presence in the savings market and push new investment products to its six million customers. As part of the deal, Standard Life has bought a 50% stake in Virgin Money’s investment business, which will expand its retail asset management services. CYBG acquired Virgin Money in October in a £1.7 billion deal that doubled its customer base and made it Britain’s sixth biggest bank.
Shoppers pull the plug on Sainsbury’s Christmas sales. A late surge in spending at Christmas does not appear to have helped Sainsbury (J) (SBRY), with sales falling by more than expected as shoppers “downtraded” to less expensive items. Britain’s second largest grocer revealed that its like-for-like sales, excluding fuel, were down by 1.1% in the 15 weeks to January 5. The City had expected a 0.3% drop. The subdued performance was in part due to its clothing and general merchandise divisions, which include Argos, where sales dropped by 0.2% and 2.3% respectively. Sainsbury’s said that Argos in particular was hit by a dramatic fall in spending on toys as the wider market fell by double digits during the period.
Sex claims fail to hit sales at Ted Baker. Sales at Ted Baker (TED) rose over Christmas despite allegations of “forced” hugging and sexual harassment by its founder. The chain, whose colourful designs can be found on everything from clothing to luggage and eyewear, said its retail sales were up 12.2% in the five weeks to January 5, compared with the same period last year. The uplift was helped by an 18.7% rise in online sales. There was concern that allegations involving Ray Kelvin, its founder and chief executive, could have turned shoppers against the brand. The chain’s performance triggered a relief rally in the City. Its shares, which had been hit by the controversy, closed up 504p, or 31.2%, at £21.20.
Mothercare has a difficult rebirth. There were grim tidings for Mothercare (MTC) with its UK sales plummeting both online and in its stores as it struggles to turn round the business. The maternity retailer said its British like-for-like sales had fallen 11.4% in the quarter to January 5 while its online sales fell by an even higher 16.3% as fewer expectant mothers and families shopped at the chain. Sales in its international business, which accounts for two thirds of Mothercare’s revenue and all of its profit, were down 1.1%, but this was an improvement on the first half of its financial year when they fell 2%.
Greggs fattens its profit forecast after festive feast. Greggs (GRG) increased its full-year profit forecast for the second time in less than seven weeks after strong sales of its bakes, mince pies and hot drinks over the Christmas period. The bakery chain said that like-for-like sales for the year in its company-managed stores had risen by 2.9% on the back of growth of 5.2% in the final quarter, while it had added 100 net new stores. As a result, it said it expected underlying pre-tax profit to be at least £88 million. It lifted its guidance from about £82 million to at least £86 million as recently as the end of November.
North Sea oil explorer surrenders to Viking raider. A London-listed North Sea oil explorer has capitulated in a bitter takeover battle after its Norwegian raider won over the majority of its shareholders with an increased £640 million offer. Faroe Petroleum (FPM) recommended its shareholders accept the 160p-a-share offer from DNO, despite insisting that it was unfairly low, after the Oslo-listed company either bought or secured acceptances for enough shares to wrest control of the company. Although Faroe had opposed DNO’s takeover, the pain of defeat should be eased by a £53 million pay day for its employees. This includes about £12.5 million to Graham Stewart, the chief executive, for his shares and share options, and more than £13.5 million split between seven other directors.
Orders safe as houses despite Brexit, insists Taylor Wimpey. Taylor Wimpey (TW.) is forecasting “solid” house sales this year, despite worries about the effect of Brexit uncertainty on consumer confidence. The FTSE 100 housebuilder said that it was on track to meet performance expectations. Home completions rose by 3% to 14,947, including joint ventures, last year. Its order book excluding joint ventures stood at £1.8 billion at the end of 2018, up from £1.6 billion in 2017. Pete Redfern, Taylor Wimpey’s chief executive, said: “We are confident that our focused strategy of managing the business through the cycle and driving further operational improvements will enable us to continue to deliver a high-quality product and service to our customers, long-term value for shareholders and growth into 2020.”
ITV bounced almost 5% on expectations that the FTSE 100 broadcaster could be next in line for a lucrative retransmission partnership with Sky. STV, the Scottish broadcaster, said on Monday that it had signed a five-year partnership deal with Sky (SKY), which gives Sky customers in Scotland access to STV’s video-on-demand service. Analysts at Liberum said this was “a pointer” to a similar deal with ITV (ITV), which they estimate could add about £120 million to its annual revenues. Sky’s existing deal with ITV is due to expire this year. Satellite and cable operators have to pay broadcasters retransmission fees for the right to publish their content. These have become a significant commercial income stream for broadcasters, especially as advertising revenues fall. Liberum reiterated its “buy” recommendation for ITV, with a price target of 260p. Investors tuned in, sending shares up 6½p to almost 138p.
A reassuring update from Taylor Wimpey prompted a rally in housebuilders. Taylor Wimpey (TW.) gained 8¾p, or 6.2%, to 149p; Berkeley Group Holdings (The) (BKG) rose 125p, or 3.5%, to £37.36; Persimmon (PSN) added 66p, or 3.2%, to £21.06.
Nichols (NICL) fizzed 120p, or 8.3% higher to £15.60, after a strong full-year trading update. It said that its British sales had grown by 12.6% as the 110-year-old brand “significantly outperformed the UK soft drinks category and gained market share”. Despite a mixed picture overseas, it said it expected full-year profits to be “at least in line with current market expectations”.
British banks and financial services companies were the subject of debate in the City as investors awaited the release of minutes from the US Federal Reserve’s December meeting, which give an indication of its thinking on further interest rate rises. Barclays analysts said recent pressure on the share prices of British banks represented an “attractive entry point” on the expectation of a “constructive” Brexit outcome. Royal Bank of Scotland Group (RBS), Lloyds Banking Group (LLOY) and Standard Chartered (STAN) all fell between 20% and 25% last year, so there is potential for the stocks to rebound once there is more clarity on Brexit. However, RBS closed down 5p at 221p. Lloyds rose by less than a penny to 53¾p, while Standard Chartered gained 2p to 615p. Barclays was more bearish on HSBC Holdings (HSBA), which has a significant exposure to Asia. Analysts downgraded it to underweight, forecasting pressure from a weaker Chinese economy, falling Hong Kong house prices and US rate rises. It closed down 3p to 646p.
TBC Bank Group (TBCG), the UK-listed Georgian bank, fell sharply after it said its unit was being investigated by the National Bank of Georgia, relating to transactions that took place in 2007 and 2008. It tumbled 80p to £14.08.
Thalassa Holdings Ltd. (DI) (THAL), the majority owner of Local Shopping real estate investment trust, an investor in community shops, announced it is preparing an offer to take the company private. Thalassa, which has a 25.5% stake, has until February 6 to make a firm offer. Local Shopping closed down ¼p at 27¾p.
Tempus – Balfour Beatty (BBY): Avoid. The company has clear merits, including a healthy balance sheet, but its sector does not
Tempus – Ultra Electronics Holdings (ULE): Hold. Prospects look strong but there are risks in delivery
