This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Three weeks ago I reviewed the first half of our UK Retail/Consumer Christmas/Jan updates. By half way we’d digested a mixed bunch, but with a positive bias. Good news from 20 of 32 names sent shares rising as much as 31.2% (Ted Baker). Bad news was confined to smaller, more troubled and less popular names, shares as much as 32.5% lower (Quiz).
After December warnings from AB Food’s accessible fashion chain Primark and then online clothes pioneer ASOS, investors were understandably nervous. The key Christmas period loomed large. We needed reassurance about the health of the UK Retail sector and UK consumer confidence. The pending message from a sixty-strong list of companies, updating 3 Jan-15 Feb, had potential to prove make or break for sector sentiment and share prices.
This time I review things from a different angle, looking at all the share price reactions since mid January. This is, after all, what pre-occupies most trading clients. For the next section, enlarge the list/picture attached. My colouring groups companies by type (supermarkets, fashion, pubs, homeware, housebuilders, etc.).
Disappointments totalled 25% in the first half of our list with 8 of 31 closing down more than 2%. This, however, rose to 33% in the second half (9 of 27). That said, major disappointments (shares closing down more than 5%) represented just 7% this time round (2 of 27; N Brown, Dominos) versus 23% before (7 of 31).
The key take-away, however, was 65% positive reactions (20 of 31) falling to a rather less convincing 48% (13 of 27). Even if very positive reactions (share prices up more than 5%) remained around 35% in both periods (10 in each period).
For those looking to trade share price volatility a more muted average absolute share price move of 5.4% down from 8.1%, will have been a blow. However, an average absolute 6.9% share price move for the whole reporting period is hardly unattractive. If anything, it should have clients reassured about the next time these companies report results.
In fact, this part is of our research service. We highlight companies scheduled to report, and what their shares did last time. As it stands, we await Dunelm to elaborate on Jan’s Q2 trading update. Galliford Try completes the list for the house-builders. Both communicate Wednesday. ASOS also has to follow up on December’s warning. However, having delayed this from late Jan to mid-Feb, this is since been pushed even further out to mid-March.
So, less major disappointments in late Jan but also fewer positive reactions. However, not enough to sway the overall positive bias from early Jan . Clients are understandably asking whether the worst is behind it for the UK Retail sector and consumer names?
It may be too early to venture this far, especially with Brexit uncertainty hampering consumer willingness to spend. But if expectations were low into year-end, they are perhaps slightly improved now. Which could offer opportunities for share price moves in the weeks and months to come. Watch this space.
For the latest trading opportunities in the UK Retail sector get access to our research Gold Pass. Let us highlight to you hand picked ideas for share price breakouts, ranges, momentum and rebound candidates and, importantly, alert you when your favourites companies report next. Might the shares move as much as last time?
Mike van Dulken, Head of Research, 8 Feb 2019
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.Prepared by Michael van Dulken, Head of Research