Consumer stocks boost FTSE, Berkeley 'returns to normality' and no shocks for Associated British Foods' Primark chain

“Consumer-facing stocks are back in fashion on the FTSE 100 as the trading week draws to a close. JD Sports, Whitbread, Kingfisher, Associated British Foods and Next all featured in the blue chip index’s top 10 risers on Friday.

“Last month’s GfK consumer confidence survey implied that the public was in ‘wait and see mode’ ahead of the general election and Brexit. Early indications suggest that Black Friday was good for retailers, suggesting that consumers might have become more willing to start spending money.

The true test will be post-Christmas trading updates which will show whether Black Friday simply brought forward festive consumer spending or whether the shops were busy right up to Christmas Day,” says Russ Mould, Investment Director at AJ Bell.

Berkeley

“Former Arsenal football manager Arsene Wenger once observed after a decline in his team’s performance that ‘if you eat caviar every day, it’s difficult to return to sausages’.

“This is the situation facing investors in housebuilder Berkeley which, in reporting a big drop in first half profit and revenue, is a victim of its own success.

“Chairman and founder Tony Pidgley has a reputation as an industry sage and the company delivered exceptional returns having acquired land cheaply in the wake of the financial crisis, largely in London and the South East, and then building high-end properties which generated exceptional margins.

“It describes the latest results as a return to normality, with attempts to manage expectations towards, at best, maintaining earnings at their current level.

“The compensation for shareholders is that the company’s strong cash flow and robust balance sheet means it has plenty of capacity to return cash.

“The company also remains among the best run names in the industry and is building on its capability, with a modular construction facility in Ebbsfleet due to be up and running in 2020.

“Like the rest of its peer group, it will be watching the election closely next week to see if the result can inject a bit more confidence into the housing market.”

Associated British Foods / Primark

“Retailers are now in their key selling season, hoping that shoppers are filling their baskets in the run-up to Christmas.

“There is always a sense of trepidation when a retail business issues a trading update in this period, for fear that it could contain a profit warning about weak festive sales.

“Fortunately for Associated British Foods, the latest news about its Primark fashion chain does not contain any shocks. Steady as she goes is exactly what the market wants at the moment and there are no signs that Primark is struggling. Yes, margins might be slightly down on last year, but there is no mention of weak footfall or slashing prices to shift goods in its statement.

“Primark still has significant potential to grow both in the UK and overseas. It should be able to take market share in the current retail environment and grow organically through opening new stores.

“While growth won’t be anywhere near the fast pace seen with online fashion retailers, slow and steady is still a positive result for what is one of the last remaining pure-play large scale physical shop retail stories.”

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