Strong day for UK and European markets, and JD Sports to face criticism over lack of furlough repayments

“Just as it was looking as if investors were losing hope, markets have rebounded from weakness earlier this week. The FTSE 100 was up 0.9% to 7,100 as investors piled into airlines and retail stocks, suggesting that the Covid delta variant is no longer considered to be a major concern,” says Russ Mould, Investment Director at AJ Bell.

“Associated British Foods bounced back after recent share price weakness, climbing 3.7% following a decent trading update. AO World said its new financial year had started well and PZ Cussons said it is pushing up prices to deal with inflationary pressures.

“These nuggets of information are very important to investors as they are act proof that many businesses are holding up as the world returns to normal, and not struggling following the initial post-lockdown boost where pent-up demand saw a widespread spending spree by consumers. It was a similar story yesterday from Dixons which said trading continued to be strong.

“The FTSE 250 jumped by 1% thanks to strength in airlines and property-related stocks such as Grafton and Howden Joinery, both beneficiaries of people doing up their homes.

“In Europe, the Euro Stoxx 50 advanced 1.1% with banks, utilities and energy companies leading the way.

“These strong market gains could serve to fire up investors and help them to regain confidence in equities. The key challenge is to sustain the positive performance as it could only take a few down days on the market for investors to turn gloomy again.”

JD Sports

“In a world where doing the right thing has never been more important for companies on the stock market, JD Sports is pushing its luck when it comes to certain issues.

“The fact it still hasn’t repaid furlough support from the Government despite guiding for at least £550 million in profit this year is disgraceful. It’s even more of an insult that it is still biding its time to make a firm decision or not whether to give back the money.

“This is an incredibly successful business which is making significant amounts of money. The furlough scheme was put in place to support companies during dark times, but JD Sports is one of many businesses which have thrived with online sales during the pandemic.

“Therefore, it should really use money from online operations to support disruption to its store estate, not rely on Government hand-me-downs. Shareholders should be pushing for the company to pull up its socks and give that money back.

“At least JD Sports has finally made the sensible decision to split the executive chairman and chief executive role. The company has been without a CEO since Barry Brown left in 2014, with Peter Cowgill being the dominant figure in the company ever since.

“The chairman’s role is to keep the board of directors in order, including oversight of the CEO. The chief executive oversees the day-to-day operations. While many US companies have executive chairs running the show, it is less common in the UK. In fact, it is considered best practice in the UK to keep the roles separate to avoid one person having too much decision-making power.

“JD Sports may be selling a considerable number of trainers and mountains of athleisure products, yet it cannot be complacent. An underappreciated risk is the likes of Nike and Adidas now selling direct to consumers, which means JD Sports effectively has new competition even though it continues to sell their products as well.”

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