Primark calls for high street bailout, and Howden boosted by home improvement boom

“In a rare move in concert, sterling and the FTSE 100 were higher on Wednesday morning as Prime Minister Boris Johnson headed to Brussels to try and thrash out a Brexit deal,” says AJ Bell Investment Director Russ Mould.

“In the short-term the FTSE and the pound often move in opposite directions because the index is so heavily biased towards overseas earnings.

“The FTSE’s gains were mirrored in Europe, traders taking their cue from strong trading in Asia overnight linked to stimulus and vaccine hopes as well as a rebound in capital expenditure in Japan.

“The best performers in London included domestic-facing stocks, amid hopes for a Brexit agreement, and firms linked to a reopening of the economy promised by the continuing vaccine roll-out such as British Airways owner International Consolidated Airlines.”

Retail Sector

“The divergent fortunes of retailers in the pandemic have been stark. Online-only players have thrived as have the big supermarkets – Tesco is able to return £5 billion to shareholders and put £2.5 billion into its pension pot, albeit thanks to the completion of the sale of its Asian business.

“It’s hard to imagine any high street retailer showing such largesse. Against this backdrop, research commissioned by Primark and produced by consultancy Public First is essentially calling for the Government to step in and save physical retail – citing public support for a rejuvenation of town centres and high streets.

“Shops are in a desperate battle to salvage Christmas following the end of the most recent lockdown measures in England and you can understand the argument for the state to help.

“After all the Government intervened to bolster the property market with a VAT holiday and looked to save hospitality with its Eat Out to Help Out scheme.

“Given physical retail faces more acute structural challenges than either of these sectors, you could argue that any intervention would be the equivalent of tilting at windmills or King Canute ordering the tide to halt.

“Primark clearly has skin in the game given it has no presence on the web and its argument that there hasn’t been an acceleration to online retail in the pandemic should probably be seen in this context.

“That said the country does face the question of what happens next to its potentially hollowed out high streets and what will replace the mounting number of jobs lost in physical retail.”

Howden Joinery

“If there is one thing that 2020 has taught us it’s that people take pride in their home appearance.

“Lockdown restrictions have driven up demand for products and services that help spruce up one’s living environment, whether it’s DIY materials or larger projects such as extensions or kitchens in the case of Howden Joinery.

“Its latest trading update has smashed expectations, rubbishing the idea that the wave of lockdown-inspired home projects earlier this year was nothing more than a short-lived fad. The scale of outperformance would suggest market forecasts will have to be significantly upgraded.

“Admittedly the trading period did include the second England-wide lockdown so people being stuck at home could have spurred another bumper sales period. The market will therefore be looking closely at results next February to see how trading has fared when there hasn’t been a lockdown.”

These articles are for information purposes only and are not a personal recommendation or advice.