Morning Market Comment
It was another retail-heavy morning for the UK markets, with both Tesco (LON:TSCO) and Marks & Spencer (LON:MKS) reporting their post-Christmas results.
Neither establishment managed to satisfy investors’ expectations. On the surface Tesco’s figures were pretty stellar; a ‘record’ performance in the run up to Christmas, and a 3.4% jump in food sales suggested the biggest of the Big Four had a fecund festive period.
Yet investors couldn’t help by feel disappointed, with total like-for-like sales quite sharply missing estimates at just 1.9% – basically in the middle of Sainsbury’s (LON:SBRY) lacklustre 1.1% growth and Morrisons (LON:MRW) robust 2.8% rise – after the collapse of wholesaler Palmer & Harvey weighed on the supermarket’s tobacco sales. Tesco, which had risen around 20% in the last 2 months, a period that contained a ‘Buy’ rating from Goldman Sachs (NYSE:GS) and the green light for its Booker acquisition, fell 4% after its results were released, leaving it at a one month low of £2.04.
As for M&S, while it avoided a Debenhams(LON:DEB)-esque disaster, it was a long way from Next's (LON:NXT) surprisingly strong Xmas numbers. The perpetually unfashionable clothing and home business was, as ever, the headline casualty, posting a 2.8% plunge in like-for-like sales across the 13 weeks to the end of December – hardly a surprise given the division’s head, Jo Jenkins, shockingly jumped ship in October.
But, but, but, the clothing department is always a bit rubbish; how about the food business, ostensibly the company’s shining star which, on paper, should have received a Christmas boost? Well once again the division under-performed expectations, suffering a 0.4% decline in comparable sales at the same time as its major supermarket rivals all saw some level of growth. Marks & Spencer just can’t shake its image as a sector dinosaur, with these results nipping a nascent rise in the bud as it fell 2.5% after the bell.
Despite these retail sector issues the FTSE continued to forge ahead on its path to fresh highs, teasing 7760 with a 0.3% increase. It helps that the pound it still on the back foot; after slipping another 0.2% cable is at $1.348, its worst price in a fortnight, while against the euro, sterling is back below €1.13.
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