Burberry sinks on CEO departure and Greggs has stamina

“Global markets kicked off the week with a subdued tone, with minimal changes to the major indices across Europe and Asia,” says Russ Mould, Investment Director at AJ Bell.

“The FTSE 100 was flat at 7,132 with healthcare, consumers goods, utilities and miners the only sectors to show any positive signs of life.

“The market was disappointed that Burberry chief executive Marco Gobbetti is stepping down, prompting a 9% decline in the share price. That shows how much he is credited with the success of the luxury goods business.

“Share prices can rise when a CEO resigns if the market didn’t like the incumbent as it suggests optimism towards the company finding someone better to do the job. Equally, share prices can fall when a CEO resigns if they are an integral part of the company’s success.

“Brent crude oil prices held firm above $76 per barrel while gold nudged 0.1% ahead to $1,784 per ounce. Higher oil prices aren’t good for airlines as fuel is a major cost. That factor, together with fading hopes of a profitable summer for the industry, saw shares in the major airlines decline between 2% and 3%, including weakness in EasyJet and Jet2.”

Greggs

“Whereas some retail businesses only a temporary surge in sales as lockdown restrictions eased, thanks to pent-up demand, Greggs appears to have been able to sustain decent sales growth even after that initial flurry of activity across the retail sector in April.

“Competition has returned as more cafes and restaurants reopens their doors, but the lure of Greggs’ famous sausage roll has proved strong enough to make it the ‘food on the go’ retailer of choice for so many individuals.

“Movement of people either by foot, public transport or car is key to Greggs’ success. It has outlets strategically located in transport hubs, motorway service stations, shopping locations and offices. Assuming we’re not all stuck at home as per 2020, Greggs could do well given its affordable prices and formula for having attractive products and ability to appeal to customers throughout the day.

“Some places like cafes are overly dependent on the morning trade, for example, whereas Greggs gets customers on their way to work, for mid-morning and mid-afternoon snacks, lunchtime and on the way home from work. That gives it a major advantage and sees the tills ringing throughout the day.

“Greggs was cautious when the company last updated and it’s interesting to see management not shouting from the rooftops despite better-than-expected trading.

“That’s the correct stance to take as there is still a lot of uncertainty across the UK. It also isn’t clear how much of the commuter trade will return as so many companies still haven’t decided on their new working location strategies.”

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