FTSE slightly higher, Unilever shares surge as Peltz gets board seat, B&M hit by rising prices

“The FTSE 100 just about kept up its run of recent gains in early trading as Russia turns off gas to the Netherlands after it refused to pay in roubles for imports and the EU banned most Russian oil,” says AJ Bell Investment Director Russ Mould.

“As we head into summer Russia has less leverage with its oil and gas supplies but the Netherland’s move is a reminder of the havoc Moscow could wreak later this year as temperatures drop and this remains a lingering inflationary threat.

“With US markets closed overnight for Memorial Day, European markets in general were lacking a bit of direction on Tuesday.

“Unilever has given in to the pressure and handed activist investor Nelson Peltz a seat on its board. The consumer goods firm has been struggling in the wake of the failed takeover of GSK Consumer Health and investors have welcomed the move warmly.

“Inviting Peltz in is only likely to ramp up the pressure on beleaguered CEO Alan Jope and we may now see the company advance plans to streamline the business and address governance concerns.

“The focus as water company Pennon reported its full year numbers was the impact of its inflation-linked debt payments, which led to a drop in profit. This somewhat undermines the company’s appeal as a way for investors to protect themselves against rising prices.

B&M European Value Retail

“When households feel the pinch one of the obvious things they can do is trade down to cheaper options and this should play into the hands of variety discount store B&M.

“However, the company is simultaneously losing the tailwind it had during the pandemic when it was in a select grouping of shops which were able to remain open. And its value-based proposition means margins are pretty skinny and therefore vulnerable to inflation.

“That helps explains why revenue and earnings were lower in the year just gone than the previous 12-month period and why the current year could see a further fall in profit.

“That’s not the message the market wanted to hear from B&M, even if the company is in a considerably stronger place than it was pre-pandemic.

“At least it sets a reasonably low bar for incoming CEO Alex Russo as he gets set to replace founder and current incumbent Simon Arora.

“The company hasn’t wasted any time in appointing the retiring Arora’s successor, though with Russo stepping up from the chief financial officer position it is not the most imaginative choice.

“While a fresh injection of ideas to the business might have been welcome, ultimately Arora has taken B&M from a struggling Blackpool grocery chain to a leading UK chain in the ranks of the FTSE 100 so maintaining some continuity has logic to it.

“Longer term there looks a decent chance B&M can emerge from the current cost of living crisis in better shape than it entered it.

“The company enjoys the kind of scale, allied with a strong balance sheet, which should help see it through tough times and come out the other side with its market position bolstered.”

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