- FTSE 100 opens higher, up 36 points
- DFS tumbles after profits warning
- John Lewis reports first half loss
Shares in DFS Furniture PLC (LSE:DFS) hit the rocks on Thursday as analysts lowered profit forecasts after it reported that profits had dipped in the twelve months ended June 27 and cautioned that sales could fall even further amid a fall in consumer spending.
The furniture retailer said pre-tax profits had fallen 43% to £58.5mln as order numbers "softened markedly" in the fourth quarter of the trading year and the first three months of the new year.
DFS outlined three potential profit scenarios for the current 2022-23 financial year, warning that underlying profits may plunge to £20.0mln-£54.0mln if sales numbers decline by 5% to 15%.
Chief executive Tim Stacey said: "Looking forward, the UK furniture market continues to be challenging and the outlook for the sector remains uncertain given the macroeconomic environment."
Analysts at Peel Hunt said the “retail market for big ticket purchases has been almost impossible and furniture has been no different” as it downgraded profit forecasts for the next two years.
The broker cut its forecast for full year 2023 to £32mln from £65mln and for 2024 to £42mln from £70mln as well as lowering its price target to 200p from 260p.
But on a positive note “history tells us that DFS comes out of crises much stronger and there is no reason that will not happen this time” it said retaining a buy rating.
9.30am: John Lewis reports half year loss
Further signs of stress on Britain's high streets as John Lewis Partnership reported an underlying loss in the first half of the year and said the outlook for the rest of 2022 was "highly uncertain" due to the impact of the cost of living crisis on consumer discretionary spending.
The employee-owned group, which runs John Lewis department stores and the Waitrose supermarket chain, posted a loss before tax and exceptional items of £92mln in the six months to July 30, compared to a profit of £69mln in the same period last year.
Sales at the department stores rose 3% on a like-for-like basis to £2.1bn, but fell 5% at Waitrose to £3.6bn.
John Lewis said the loss reflected a combination of factors, cost inflation not being fully passed on to customers, the impact of the cost of living crisis on demand and the unwinding of COVID-19 shopping patterns and investment in the business.
9.00am: FTSE 100 makes steady early progress
FTSE 100 made steady early progress on Thursday as investors cautiously dip their toes back into the market after two days of falls.
At 8.55am the UK’s blue-chip index was up 37 points to 7,315 while the broader FTSE 250 advanced 116 points to 18,965.
Richard Hunter, head of markets at interactive investor, said ““UK markets showed some signs of brief relief, with the flagship FTSE 100 posting moderate gains in early exchanges.”
“The turnaround was not enough to reverse the declines of the previous day, however, with the index hugging neutral territory for some weeks now.”
“Volatility seems set to remain entrenched for the time being as the global economy grapples with high inflation and central bank measures to tame it” Hunter said.
Hilton Food Group PLC (LSE:HFG) topped the FTSE 250 fallers after warning on full-year profits after posting a drop in interim pre-tax profits to £34.4mln, down 3.9%.
The group cautioned "Across our markets, we have seen volumes come under pressure with the cost of living increasing and consumers becoming ever more cost-conscious.”
“In our Seafood business these trends have been exacerbated with world events leading to unprecedented raw material price increases.”
"Given these factors, and combined with the impact of start-up costs and rising interest rates, the board now anticipates that profitability for the year will be below expectations."
8.40am: Citi Research upgrades Tate & Lyle to buy
Tate & Lyle PLC (LSE:TATE) received a boost today as Citi Research put the company on its buy list.
Shares rose 2% after the upgrade to buy from hold with Citi forecasting that the company can deliver 9% normalised EBIT compound annual growth which it said is not appreciated at the current levels of the share price.
Although in the near-term Tate is more exposed to gas inflation than its peers Citi estimated that the downside to consensus EBIT forecasts was limited in full year 2024 once adjusted for pricing and self help.
Citi said it lied the company for its transformational story and defensive characteristics and sees further upside coming from as it narrows the valuation discount to higher multiple ingredients names.
8.15am: FTSE 100 opens higher
The FTSE 100 opened higher on Thursday following gains in the US overnight and ahead of US retail sales figures later today which will give another indication as to the strength of the US economy.
At 8.10am the FTSE 100 was 45 points higher at 7,322 with the broader FTSE 250 up 62 points at 18,911.
But investor confidence is fragile shown in a snapshot of investor attitudes from Hargreaves Lansdown (LON:HRGV).
The Hargeaves Lansdown Investor Confidence Index showed confidence plunged 38% between August and September with confidence in UK economic growth dropping 35% between August and September.
Susannah Streeter, senior investment and markets analyst, at Hargreaves Lansdown said: “Recent market volatility has hit sentiment and data showing that inflation is still proving very hot to handle for central banks is clearly proving disconcerting.”
“Investors are expecting that growth will be sideswiped by robust interest rate hikes, with confidence in UK economic growth plummeting by 35% between August and September.”
“This is a marked change to sentiment about UK economic growth in August, which was more optimistic, with confidence rising by around 13%.”
DFS Furniture PLC (LSE:DFS) slumped 13% after warning that order volumes softened markedly in the fourth quarter of full year 2022 and the first quarter of full year 2023 reflecting a trend seen widely across the furniture industry.
As a result, the group presented three scenarios for performance this year giving a wide range of pre-tax profit forecasts for the coming year of between £20mln to £54mln which it based on assumptions of an average market order volume decline relative to pre-pandemic levels of between -15% and -5%.
Chancellor Kwasi Kwarteng is reportedly considering a plan to scrap caps on bankers' bonuses as part of a post-Brexit bid to boost the City's competitiveness and the UK economy.
He argues the cap, which was introduced under EU rules in 2014 following the 2008 financial crisis and subsequent eurozone debt crisis, would make London a more attractive destination for top global talent according to the Financial Times.
The measure was always opposed by the UK on the grounds that it would damage London's standing as a global financial hub.
But the idea of ditching the cap was dropped by Boris Johnson's government on the grounds it would be politically difficult to support wealthy bankers at a time of a cost of living crisis.
7.25am: Shell (LON:RDSa) CEO steps down
Oil and gas giant Shell PLC (LSE:SHEL, NYSE:SHEL) has confirmed recent speculation that chief executive Ben van Beurden will step down from the role at the end of 2022 following a 39 year career with the company.
Van Beurden will be succeeded by Wael Sawan on January 1, 2023, but will remain with the group until June 30, 2023, acting as an advisor to the board, in order to ensure a smooth transition.
Chairman Andrew Mackenzie said: "Ben can look back with great pride on an extraordinary 39-year Shell career, culminating in nine years as an exceptional CEO.”
“He leaves a financially strong and profitable company with a robust balance sheet, very strong cash generation capability and a compelling set of options for growth.”
"Wael Sawan is an exceptional leader, with all the qualities needed to drive Shell safely and profitably through its next phase of transition and growth.”
7.15am: London seen higher ahead of US retail sales numbers
UK markets are expected to open higher today, recouping some of the losses of the past two days but Michael Hewson chief market analyst at CMC Markets UK said the US inflation surprise earlier this week continued to hang over European markets like “a black cloud.”
Hewson said “The only question now remains over whether we might see a 75bps move, or something more substantive in the form of a 100bps move” by the Federal Reserve.
“It still seems unlikely that the Fed will go by more than 75bps at this point despite the collective freakout of the past couple of days, with the positive finish in the US last night expected to see European markets open slightly higher later this morning.”
Another gauge of the state of the US economy will come today with US retail sales numbers due which could reinforce this hawkish narrative if there is another strong number.
“The resilience of the US consumer in the face of shrinking disposable incomes has been fairly notable this year, despite high food and energy prices which appear to have had little effect on the US consumer’s willingness to go out and spend money” Hewson said.
“US retail sales have been positive every single month this year, apart from a modest -0.1 fall in May” he added.
“Expectations for today’s August numbers have been revised lower in the past few days from a rise of 0.3%, and is now expected to come in at -0.1%” Hewson said.
6.55am: FTSE 100 seen higher
FTSE 100 expected to make a bright start to the day following gains in the US overnight with another important set of US economic data later with retail sales due to be announced.
In London, spread betting companies are calling the lead index up by around 30 points.
US markets ended a roller coaster session in positive territory, but Tuesday’s market rout continued to weigh heavily as investors speculated just how aggressive the Federal Reserve would be with its next rate rise.
At the close the Dow Jones Industrial Average was 30 points higher, or 0.1%, at 31,135, The S&P 500 gained 13 points, or 0.34%, to 3,946, while the Nasdaq Composite rose 86 points, or 0.74%, to 11,720.
In London, IG Group PLC is set to issue a trading statement while results are due from DFS Furniture amongst others.