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Last Week in the City: Retail detail after mixed Christmas

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped UK equity markets this week (7 to 11 January, 2019).

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Garry White

in Features


Global markets received a boost this week on hopes that there could be progress in talks between the US and China over Donald Trump’s trade war. Sharp gains in the oil price also helped the FT 100 rise 2.4% over the week by mid-session on Friday. The FTSE 250 was 4 ahead.


The UK Parliament resumed debating Theresa May’s apparently doomed Brexit deal on Friday. A vote is expected on Tuesday next week.

Rebel Conservative MPs joined forces with Labour to inflict a fresh blow on Theresa May's government in a Commons Brexit vote. It means the government will have to come up with revised plans within three days if Mrs May's EU withdrawal deal is rejected by MPs next week. It could also open the door to alternatives, such as a referendum.

Foreign Secretary Jeremy Hunt has warned the UK faces "Brexit paralysis" if MPs reject Theresa May's EU deal.

European Commission President Jean-Claude Juncker said he was in touch with the UK government to help Theresa May win parliamentary support for the Brexit deal - though he reiterated that the remaining 27 EU members are willing to offer only clarifications and are opposed to reopening the talks.

Hedge Fund manager Crispin Odey said he though Brexit would not now happen and he was betting on a rise in the pound because of this.


Growth in the UK's economy slowed in the three months to November, expanding at its weakest pace in six months. The economy grew by 0.3% during the period, less than the 0.4% in the three months to October. Manufacturers suffered their longest period of monthly falls in output since the financial crisis, being hit by weaker overseas demand.

UK industrial production dropped at its steepest annual rate since 2013 during November, echoing weakness across Europe.

Federal Reserve Chairman Jerome Powell said he doesn't see a US recession in the near future, despite the rising likelihood of slowing growth elsewhere around the globe. He also said he would "be patient" as the central bank determines when to hike interest rates next and that he would press ahead with plans to significantly reduce the Fed’s balance sheet.

The World Bank said global economic growth would slow to 2.9% this year from a downwardly revised 3% in 2018, citing “rising downside risks to the outlook”.

German factory orders dropped in November, dragged down by a fall in demand from other Eurozone countries. The Economy Ministry said that overall orders were 1% lower than in the previous month following a slight 0.2% gain in October.

John Redwood, Charles Stanley’s Chief Global Economist, looks at what’s in store for the European Parliament as May elections approach here.


After trade talks between China and the US were extended for an extra day, hopes were mounting that a deal could be struck.

John Redwood, Charles Stanley’s Chief Global Economist, looks at Chinese moves to boost its economy here.

The US government shutdown rumbles on with little sign of a resolution. President Trump cancelled his planned trip to the World Economic Forum in Davos, Switzerland later this month, citing what he called the Democrats’ “intransigence” on his funding request to build a wall along the United States’ southern border. The president may use his national emergency powers to fund his border wall.


Shares in online streaming service Netflix surged after it saw considerable success at the Golden Globes. It notched several wins for the Mexican film Roma, comedy series The Kominsky Method, and The Bodyguard, the last of which won a best actor award for its lead, Richard Madden. The Bodyguard was made by the BBC, but Netflix distributed the series worldwide.

Amazon confirmed it pays UK business rates of only £63.4m, almost £40m less than Next, despite clocking up more than double the sales than the high-street retailer.

Attorneys representing an Alphabet shareholder revealed details of a new lawsuit that claims its board of directors covered up sexual misconduct by former Google senior executives, including Andy Rubin, the creator of the popular mobile operating software Android, and Amit Singhal, the former head of search. The men were given huge severance payments, despite the board knowledge of impropriety, the suit claims.

Shares in Japanese tech investor Softbank rallied following reports the group had sharply scaled back its investment in WeWork. The group scaled back its investment to $2bn from $16bn, reports suggested.

South Korea’s Samsung said Tuesday that its fourth-quarter operating profit is set to plunge nearly 30% from a year earlier, well below analysts' forecasts. It blamed the sharp drop on "lacklustre demand" for its memory chips and "intensifying competition" in the smartphone industry. The warning came a week after US iPhone maker Apple also issued a sales warning.


German discounter Aldi saw its best-ever Christmas in the UK, as sales rose to almost £1bn in December. However, the rapidly-expanding retailer did not disclose like-for-like sales numbers – a standard industry indicator that looks at growth in stores that have been open for a year or more – though a spokesman did say they were "positive". Two-thirds of households shopped at either Aldi or Lidl over the 12 weeks, giving them a record combined market share of 12.8%, according to data company Kantar Worldpanel.

Tesco saw good Christmas trading. Britain’s biggest retailer posted 2.2% growth in UK like-for-like sales in the six weeks to 5 January, its strongest Christmas performance since December 2009. Sales rose 0.7% in the 13 weeks to 24 November.

Sales at J Sainsbury, which is currently merging with Walmart’s Asda, fell in the key Christmas trading period. Total retail sales, excluding fuel, fell 0.4% in the 15 weeks to January 5. On a like-for-like basis retail sales, excluding fuel, dropped 1.1%. Management said its Argos business, which includes general merchandise, had a strong Christmas but sales over the quarter were hurt by subdued consumer spending and the company’s decision to reduce promotional activity during Black Friday.

Wm Morrison sales rose over Christmas but it missed market expectations and its shares fell. Its like-for-like sales rose 3.6%, helped by a 3% rise in the wholesale division, which supplies Amazon and McColls.

Unlisted Waitrose had a difficult Christmas. Sales at the upmarket supermarket slid by 1.7% in the 12 weeks to December 30, making it the biggest festive loser among grocers.

Other retail

Marks & Spencer has seen its sales drop over the Christmas holiday period. Like-for-like sales, which strip out the impact of new stores, were down 2.2% in the 13 weeks to 29 December. Food sales fell 2.1% and its clothing and home sales division slid 2.4%. Department store Debenhams suffered a 5.7% slide in like-for-like sales over the 18 weeks to 5 January, worse than analysts had feared. However, the company did not warn on profits for the full year as it had identified further costs savings. The company is in talks with lenders over a refinacing of its significant debt.

Unlisted John Lewis said it may axe its staff bonus this year as it warned of falling profits, despite a rise in sales over the Christmas period. The department store saw sales increase 1.4 % to £2.2bn in the seven weeks to 5 January.

Halfords shares fells after the company issued its second profits warning in a year, blaming the mild winter weather and lower consumer confidence for a fall in sales.

Shares in home furnishings group Dunelm surged after it upgraded its profit expectations, thanks to a better-than-expected rise in Christmas sales. Management said that if recent trading trends continued, it see annual pre-tax profits modestly ahead of current expectations.

Ted Baker shrugged off concerns about a culture of “forced hugs” under its founder, Ray Kelvin, delivering strong sales growth over Christmas despite the revelations. Retail sales increased 12.2% in the five weeks to 5 January, boosted by strong growth online.

Card Factory shares fell in early trading Thursday after it reported flat sales for the year-to-date (YTD) and predicted 2020 would be “another difficult year” for the company.

Footasylum issued a profit warning. Management now expects full-year core earnings at the lower end of analysts’ estimates, as the fashion retailer was hit by lower margins. The company said it plans to implement a cost-savings plan.

Food outlet Greggs had a strong finish to 2018, prompting it to raise its profit guidance for the second time in two months. The company recently launched a vegan sausage roll that is selling “very well”.

Shares in Brighton Pier Group, which runs the iconic pier as well as other leisure sites, collapsed 30% on Thursday on the news profits were expected to be 18% lower than originally hoped. Weekend trains to and from the seaside city from London were hampered by engineering works in the second half of the year.  This “significantly impacted the number of visitors into Brighton and onto the Pier,” the company said.

Brighton Pier is chaired by Luke Johnson and there were issues in another of his companies this week too. Patisserie Valerie acknowledged there were issues with supplier payments and a large backlog of unpaid invoices.


Oil headed for its biggest weekly gain in over two years on hopes that OPEC will manage to shrink a glut and trade tensions between the US and China will ease. Brent crude futures were up 9.1% over the week by mid-session on Friday, with prices up by 23.6% since Christmas Eve.


Former Xstrata boss Mick Davis announced his comeback with a new venture that will seek out deals. Sir Mick, currently chief executive and treasurer of the Conservative Party, has set up Niron Metals as a vehicle to scour for potential opportunities around the world in industrial materials such as nickel, zinc and copper.

Acacia Mining, a Tanzanian gold producer dealing with an ongoing dispute with the country’s government, received a fresh blow on Thursday from the country’s government, which fined the miner 300 m Tanzanian shillings (about $130,000) over allegations of breaching environmental rules by its North Mara operation.


Oracle founder Larry Ellison acquired a $1bn stake in Tesla, making him the carmaker’s second-biggest individual investor after his friend Elon Musk. Mr Musk was in China this week to break ground of the electric automaker’s first non-US factory. Tesla acquired land for a factory on the outskirts of Shanghai for about $140 m in October 2018. Producing vehicles in China would reduce costs from tariffs and ocean transport for Tesla.

Honda has told its workforce it will halt production for six days in April due to Brexit logistics and border disruption. “To ensure Honda is well placed to adjust to all possible outcomes, we are planning six non-production days in April 2019," a spokesperson said.

Jaguar Land Rover, which is owned by India’s Tata, confirmed it would cut 4,500 jobs, with many in the UK, as it battles falling sales in China and confusion over diesel emissions rules.

US carmaker Ford unveiled plans for a major shake-up of its operations in the UK and mainland Europe. It is expected to lead to thousands of job, although cuts at its UK factories are not thought to be imminent.

Prosecutors in Japan have indicted former Nissan chairman Carlos Ghosn with two fresh charges involving financial crimes. Mr Ghosn, who has been detained since November, was charged with aggravated breach of trust and understating his income. He had already been indicted on a separate charge of underreporting his pay over five years. Renault said it had, so far, found no evidence of illegal or fraudulent payments to Carlos Ghosn, despite the chief executive of the French carmaker remaining under arrest in Japan.


Japan’s Takeda completed its £46bn acquisition of Shire Pharmaceuticals.

After last week’s announcement that Bristol-Myers Squibb would buy Celgene for $74bn, there was a further US M&A announcement in the sector. Eli Lilly announced it will acquire Loxo Oncology for about $8bn in cash. The FDA approved Loxo’s first commercial medicine in 2018, which the biotech company developed in partnership with Germany’s Bayer.

As the US Democrats flex their muscles after taking over the US House of Representatives, should phama investors be worried about their plans for drug pricing? Garry White takes a look here.


There was some significant turbulence in the airline industry this week.

Flybe shares tumbled 90% on Friday after a consortium led by Richard Branson's Virgin Atlantic agreed to buy the troubled regional airline for just £2.2m, significantly below Thursday’s closing market value of £36m. Flybe put itself up for sale in November after a profits warning that outlined the extent of its woes, as it struggled to cope with rising fuel costs, currency volatility and political uncertainty.

In the US, American Airlines issued a profit warning, sending shares in rivals such as United Airlines, Delta Air Lines and Southwest Airlines. The largest US airline cut its 2018 profit forecast and issued revenue guidance at low end of its range.

Air France is to look at ways of closing down its low-cost airline Joon and integrating Joon employees and aircraft into Air France. The airline, aimed at younger clients, launched in late 2017, but Air France said the brand had been "difficult to understand from the outset".  

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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