The FTSE is trading higher this morning as Sainsbury (LON:SBRY) managed to stage a recover after its failed bid for rival chain Asda. The company’s Chief Executive Mike Coupe, the man behind the merger idea, managed to reassure investors that the supermarket has the capacity to improve earnings and halt declining sales even without the acquisition. He presented his Plan B Wednesday which includes improving more than 400 of its shops and reducing the debt by at least GBP600 million.
Other corporate news was less positive for the FTSE, with Just Eat (LON:JE), which lost its chief executive at the beginning of the year, struggling to appease investors about weaker growth and losing market share to the competition.
Housebuilders are also battling to keep shares on an even keel after Persimmon (LON:PSN) warned about rising costs, echoing a similar warning by rival Taylor Wimpey (LON:TW). However, not all news was negative as the latest data from Nationwide showed that British house prices continued to rise, albeit at a slow pace.
First time buyers played a key role in the increase despite the uncertainty over Brexit as low interest rates and low unemployment helped them step onto the housing ladder.
Europe closed, Apple results to help Wall Street on opening
In contrast to London the rest of Europe will have a quiet day as Germany, France, Spain, Italy and the majority of the EU countries are closed for the May Day holiday. In the US a 5% rise in Apple shares (NASDAQ:AAPL) following a positive earnings report after hours Tuesday should bode well for the start of the day’s trading on Wall Street.
The local elections in the UK seem to be attracting far less attention than national politics were the Labour party is trying to fully define its approach to Brexit, pushing primarily for its own Brexit deal, but if that fails most likely opting for a second referendum as their preferred alternative option. The pound seems to be taking everything in its stride at present and is trading higher against the dollar and the euro. The euro also staged a recovery against the dollar, backed by a slight increase in Europe’s first quarter GDP numbers, better than expected Eurozone unemployment data and a slight nudge higher in German CPI.
Inmarsat’s mixed result
Inmarsat (LON:ISA)'s has released another mixed bag result that is unlikely to make potential rival bidders any more interested in making a move on the company.
The maritime business, once Inmarsat's staple earner, is continuing to haemorrhage sales as competition in the sector bites.
Aviation is clearly where it's at for Inmarsat and the future of that business still looks promising as commercial airlines add Wifi services to their offerings.
The 53% jump in aviation sales during the quarter is indeed impressive and helps support the rationale behind the Apax Partners and Warburg Pincus led move on the company.
But the maritime division still generates more revenue than any other part of the business, highlighting that it won't be all smooth sailing for Inmarsat's ultimate owners.
Sainsbury’s sales slide
Sainsbury's failed bid for Asda may have earned Mike Coupe a lot of criticism, but the Asda deal is at least paying some dividends for him.
An improvement in general merchandise sales in the fourth quarter and better than expected cost savings generated by the Asda merger have helped Sainsbury's beat its underlying profit expectations.
The problem for Coupe is that total quarterly sales for the company, while not falling as far as expected in the fourth quarter, are still falling at an uncomfortable rate.
The cost of the failed Asda bid has also been embarrassingly laid bare today, coming in at a cool £46m.
Overall, today's better than feared profit numbers will provide some small consolation for Coupe after last week's nasty news from the competition regulator.
But with the Asda deal now dead and the German discounters continuing to pinch market share, Sainsbury's still looks like it may be in need a strategy reset. And that could come with a change at the top.
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