Another day of gloom for the retailers pegged back the FTSE
for the first hour of trading, but the bulls have since taken control of the session ahead of German Industrial numbers and a rate decisions from the ECB and BOE.
After yesterday’s FED minutes provided little insight or excitement for equities, traders now turn to the ECB and BOE for inspiration. Neither are expected to shock with the headline figure but markets will do their best to decipher any signals on both stimulus and economic outlook for 2014.
For UK stocks it was again the supermarkets taking centre stage with both Tesco’s Morrisons and Marks and Spencers all giving traders something to chew on.
Many had predicted that Tesco’s may disappoint, but it was Morrison’s that provided the greatest concern, warning that full year profits will be at the lower end of forecasts with even Christmas sales flagging, down 5.6% on a like for like basis. The stock was over 5% lower on the open.
Tesco’s failed to flatter yet again, with underlying Christmas sales dropping 2.4% in the 6 weeks to January 4th, but still sees full year trading profits within the expected range. To some extent, Tesco has become a victim of its own success in the last 2 years, having gained such a dominant UK market share as to make itself the obvious target for any incomers to the industry, but somewhat obliging by taking its eye off the UK market by its elaborate efforts to expand overseas. The worry now is that having re-focused efforts back in the UK with a re-structuring plan that has already surpassed the £1billion mark, shareholders still have nothing but annual losses of over 6% to show for it.
Both Tesco and Morrison’s have struggled from sitting in somewhat of a no-man’s land in recent quarters, shedding market share to the extremes of the pricing scale, with Aldi and Lidl piling on pressure to discount while Waitrose and Marks and Spencers are preferred as the higher quality alternative.
On that note, Marks and Spencers clearly have got their food offering right, but continue to struggle in the clothing and home wear space, still suffering from a bit of an identity crisis as they try to find their place in the market. Food sales were again strong and an unseasonal October seems to provide enough of an excuse for the clothing shortfall for investors to see some value, with the stock up 3.5%
Given its reliance on the heavyweight Supermarkets, it’s not a huge surprise to also see Ocado Group following its major clients firmly into the red this morning, down 2%.
Greggs had a welcome return to sales growth in q4, with strong trading over Christmas helping to put it on track to hit full year expectations and see the stock surge 7%.
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