Dunelm sees strong trading and Future beats expectations yet again

“Global markets have woken up on the wrong side of the bed, with share prices flashing red across most of Asia and Europe,” says AJ Bell investment director Russ Mould.

“Despite the initial shock when covid struck in early 2020, stocks had a tremendous run last year as investors priced in the potential for strong earnings recovery. While we’re now seeing a lot of companies beat expectations, it isn’t enough to sustain momentum in the market.

“Inflation concerns continue to trouble investors, with the UK among the countries reporting a growing cost of living. A key focal point for the market is whether economies are running too hot and what central banks might do to cool them down.

“Miners bore the brunt of the sell-off among stocks on the FTSE 100, with copper producer Antofagasta down 4.5%. Tech-heavy investment trust Scottish Mortgage slid 3.2%, meaning it has fallen nearly 10% year to date, a big reversal from several years of market-beating performance.

“Brent Crude oil fell 1.1% to $67.97 per barrel while gold continued its rally which has been in motion since late March, trading at $1,870 per ounce.”

Dunhelm

“Dunelm joins a growing list of retailers to say that earnings are better than expected. The reopening of shops follow lockdown appears to have gone very well for a lot of retailers thanks to pent-up demand. Dunelm is certainly among them, but one must heed to a warning from fashion seller Next that recent trading patterns are unlikely to be indicative of the rest of the year. That will apply to the whole retail sector, not just Next.

“Put simply, a lot of us have amassed quite a bit of spare cash during the various lockdowns and we’re ready to go on a spending spree. But once that money is gone, spending levels seem almost certain to ease back.

“In addition to this pent-up demand driving trading in recent weeks, Dunelm will have also benefited from a poor bout of weather. Bored at home, but with more freedom to get out, consumers are likely to have ventured to shops with good parking spots just to pass the time. Dunelm is often located on retail parks where parking is plentiful.

“The surge in the property market will also play to its strengths. People either moving home or doing up their home will find plenty of reasons to stock up on homewares from Dunelm.

“However, there is an underlying feeling that Dunelm will have to enjoy the sales spike while it lasts, as it can’t go on forever.”

Future

“Few companies can match the number of earnings beats delivered by publishing group Future in recent years.

“Storming to record first-half results and guiding for annual profit to come in ahead of expectations reflects well on the company’s strategy under chief executive Zillah Byng-Thorne.

“Appointed in 2014, Byng-Thorne’s plan has been simple but effective. Buy up magazine titles on the cheap and feed them into Future’s existing platform which helps generate revenue from content and brands through digital advertising, e-commerce and securing clicks through to partnered retailers and events.

“The shares are now approaching their highest levels in 20 years – having enjoyed a previous brief moment of glory during the dotcom boom after a late 1990s stock market flotation. Having endured a spectacular fall from grace in the early noughties, shareholders will hope the current run of success proves more sustainable.

“The digitally-centered approach meant Future was well-positioned for the pandemic as it wasn’t too reliant on sales of physical magazines which dried up amid covid restrictions.

“The focus on titles which serve people’s hobbies and interests has probably been a boon, given people have been looking to distract themselves from the day-to-day realities of coronavirus.

“The acquisition of comparison site GoCompare in 2020 was something of a departure for Future and was initially met with some bemusement by investors who probably felt that if the plan wasn’t broke why fix it.

“However, the integration seems to have started well and there are early signs Future is starting to sprinkle some of its magic touch over the business.”

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