Markets stumble, BT under pressure despite Discovery venture, and Virgin Wines disappoints with new customer sign-ups

“After a few decent days on the market, equities hit a stumbling block on Thursday with most of the major indices across Europe and Asia easing back. One of the few exceptions was the FTSE 100 which once again is proving to be ugly duckling that has turned into a beautiful swan as far as investors are concerned,” says Russ Mould, Investment Director at AJ Bell.

“Helping to keep the FTSE 100 in positive territory was oil producer Shell with a well-received update that included a promise to pay higher dividends for the first quarter of the year.

“Shell has gone from villain to hero on the markets in the past year thanks to the rising oil price boosting its cash flow, and it being a prime example of a cheap ‘value’ stock whose earnings should benefit in a rising inflationary environment.

“The big news later today is the Bank of England’s interest rate decision, with the central bank widely expected to push up rates from 0.25% to 0.5%. Putting the rates up by a greater amount would be a shock to the market but it doesn’t feel as if that would happen.”

BT

“There’s a world in which BT emerged from the pandemic as a big winner. Demand for reliable broadband went through the roof as office dwellers worked from home while lots of people were looking to be entertained at home – so its TV offering should have been in demand too.

“However, a legacy of public ownership and a large rather unwieldy set of operations means BT has all the agility to take advantage of market opportunities of an African elephant and its shares are only a smidge higher than their pre-Covid levels.

“Having made a big pitch for a slice of the football pie some years ago, battling out with Sky for rights to Premier League and Champions League football, BT now wants to find a partner to share the huge costs involved.

“Eurosport-owner Discovery looks to be ready to step in and this would be a positive development for BT even if it would represent an admission of at least partial failure for the bold sporting rights strategy launched a decade ago. Though if you were feeling kind, you could say it did the job of stemming the loss of broadband customers to Sky.

“BT’s uneasy truce with its big rival was reflected in an extension in the reciprocal sharing of content across its platforms out to 2030.

“The company’s business-to-business operation endured a tricky quarter, which contributed to the negative market reaction to this latest update.

“Telecoms magnate Patrick Drahi’s presence on the shareholder register is likely to keep up the pressure on BT management, with speculation of a possible bid or break up of the business unlikely to go away soon.”

Virgin Wines

“Retailers have three goals: attract new customers, retain existing customers, and get both sets to spend more money each time they shop.

“Virgin Wines has fallen short on signing up new shoppers but says those which are buying wine are ‘high quality’ which implies they are spending well, and they’re loyal. So, two out of three isn’t a bad outcome, given the fragile backdrop with consumers under pressure from a rising cost of living.

“Headlines that the price of wine is set to soar by 20% this year means Virgin Wines and its rivals will have to work hard to get customers to keep spending on the good stuff rather than downgrading to a cheap bottle of plonk.

“To Virgin Wines’ advantage is its membership scheme whereby customers deposit cash into an account with the retailer each month, earn a bit of interest, and then use those funds to buy wine when they want it. This eases the pain for the customer of having to dig deep in one transaction.”

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