FTSE up, warnings from THG, DFS and Hilton Foods, Shell CEO to leave

“After all the drama around high inflation rates in recent sessions, pockets of Asian and European markets managed to push ahead on Thursday. The Hang Sang jumped 0.5%, the Nikkei nudged up 0.2% and the DAX advanced 0.1%,” says Russ Mould, investment director at AJ Bell.

“In the UK, the FTSE 100 traded 0.6% higher, with banking stocks leading the way. Lloyds and NatWest were among the biggest risers, no doubt driven by investor expectation of higher interest rates and how that might have a positive impact on the banking sector’s earnings.”

The Hut Group

“THG declared it had made ‘substantial progress’, but investors who have suffered a 92% share price loss since the company joined the stock market may think otherwise. While it has reported record first-half revenue at £1.1 billion, it is still making an operating loss. Costs have been going up and margins are being squeezed.

“THG boasts of a loyal customer base but when it sells commoditised products, this loyalty is going to be tested as consumers look hard for ways to save money – and that could mean buying their protein or beauty products from somewhere else.”

DFS and Hilton Foods

“Consumers are certainly thinking twice before they hit the ‘buy’ button and that is evident in DFS’ results. It says recent order volumes have ‘softened markedly’ relative to pre-pandemic levels. The idea of splashing £1,000 on a sofa will seem unfathomable to many people in the current climate, explaining why big-ticket retailers are so vulnerable if we’re heading into a recession.

“Even food suppliers are finding life hard. Hilton Foods is suffering from the cost-of-living crisis as consumers are watching every penny. That means higher prices for meat and seafood are becoming too much for many people to stomach, feeding into lower sales volumes for Hilton. It has joined the gang of companies issuing profit warnings, adding up to a barrage of bleak news for investors to digest.”

Shell

“Ben van Beurden has achieved a lot for shareholders in his near-decade as chief executive of Shell. Principally, he has managed to navigate the company through some uncertain times as the world went ESG-crazy and businesses in the oil and gas industry were viewed as toxic entities not fit for the modern world.

“He has helped to steer Shell towards renewable energy while at the same time capitalising on the sudden surge in the oil price as the world emerged from the pandemic and the Ukraine crisis sent ripples through the energy sector.

“The CEO can even be credited for making a transformational acquisition that unlike most deals didn’t haunt the business afterwards. Typically, large acquisitions don’t turn out the way buyers hoped, but Shell’s purchase of BG in 2016 was well-timed, giving it a much bigger position in gas and thereby enabling it to benefit from this year’s surge in the commodity price.

“Van Beurden’s resignation comes as Shell’s share price returns to pre-pandemic levels, illustrating how he has steadied the ship and now seems as good a time as any to pass the baton to a new leader.”

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