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Another bad day for UK Retail and Housebuilders, with profits warnings from Debenhams and Foot Asylum hurting for former and McCarthy & Stone doing the same for the latter. And then there is hobby group Hornby and UK Index member Ashtead down in the dumps too.
Debenhams shares trade 11% lower, well off their -20% lows but still under pressure, after suggesting that full year pre-tax profits could miss consensus by 20-30% after a tough May and June. This is its third warning of the year, and we’re only at the half way stage.
Elsewhere in the sector, note Foot Asylum shares -47% after it too warned on profits, citing higher costs as it invests in both online and expensive store openings.
The outlook for the high street is tough to say the least, with consumer confidence in the firing line from Brexit uncertainty and a possible Bank of England rate hike to increase borrowing costs. It is also echoed by real estate owners being lobbied for rent cuts to allow struggling outlets keep the ball in the air for that little bit longer.
Even hobby group Hornby is 14% south after its pre-tax loss widened and its cut sales guidance after disappointing sales of train and Scalextric sets in the 10 weeks to June 8 and a backlog of stock to clear.
In housebuilding, McCarthy & Stone trades 15.7% lower after its own warning put revised profit guidance up to 40% below expectations after a noticeable decline in reservations since mid-April, along with a softening in prices that echoes official house price data. The CEO will also leave and we’ll have to wait for September for an update on its strategic review. Peer housebuilders also lower, but more likely caught up in the general risk-off-trade-war-concerns mood this morning.
UK Index member Ashtead is also 7% lower after Q4 profits failed to grow as fast as rental revenues (underlying and statutory) and were slower than Q3. Even if FY results were relatively solid, the final dividend upped by 20% and the company is confident in the medium term outlook, this is not enough to detract from its significant exposure to the US, at a time when President Trump is fanning the flames of a potential trade war with China and maybe even allies.
What a morning! And after such a convincing England win last night.
Mike van Dulken, Head of Research, 19 Jun 2018
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.
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