FTSE higher ahead of crunch central bank meetings, Ashley to leave Frasers, Kingfisher profits slump

“The FTSE 100 made a strong start to trading after the Bank Holiday, taking its cue from strong trading in Asia and the US,” says AJ Bell Investment Director Russ Mould.

“All the focus this week will be on interest rate decisions in the US and UK and a so-called ‘mini budget’ from new chancellor Kwasi Kwarteng on Friday.

“Despite the pressures on household finances, travel operator TUI suggests Britons are still desperate to go on holiday and that they are willing to pay higher prices to jet off abroad.

“That resilient market is likely to be tested like never before in the coming months and while a week in the sun may be being prioritised for now, there comes a point where it’s just not affordable even for middle-to-higher-income families.

“The company does not have much visibility as customers are typically booking later. As it returns to profit, TUI must hope that some of the pressures on consumer spending ease.

“Ideally by the time next summer rolls around, there will still be capacity and appetite for people to spend on holidays and the significant disruption at airports which scarred 2022 is a thing of the past.

“It turns out Moonpig can’t fly as it nosedived on a mixed trading update. While it is sticking with existing guidance for now, news it is retrenching to focus on card sales – rather than the little extras like chocolates and gifts which provide useful ancillary revenue – and a return to the seasonality seen pre-Covid aren’t messages engineered to enthuse shareholders.”

Frasers

“News that Mike Ashley is stepping down from the board feels like a seismic moment for Frasers Group.

“Ashley has been so synonymous, for both good and bad, with the retail empire which has grown out of the Sports Direct brand that his departure, even if he will remain a major shareholder and adviser to the company, is a big shock.

“He may have divided opinion in the City, but his entrepreneurial skills still helped take the business from a single store in Maidenhead to one of the UK’s largest retailers.

“Without him on the board Frasers may have a bit of an identity crisis. Ashley’s strategy of buying fallen competitors and adopting a ‘pile them high, sell them cheap’ approach to retail may have attracted criticism but it had some clarity to it.

“Without him, will Frasers management have the same level of ruthlessness or will it start to look like a bloated and unfocused business at a time when the pressures on the industry are very acute?

“A lot will fall on the shoulders of the current CEO and Ashley’s son-in-law, Michael Murray, which shows that Ashley is literally keeping the leadership of the business he built in the family.”

Kingfisher

“Not unfairly, the B&Q-owner Kingfisher is keen to point investors in the direction of pre-pandemic sales when it comes to its first-half results. Unfortunately, the market is having absolutely none of it.

“DIY stores benefited from two key things during lockdown. First they were, unlike many other retail businesses, able to trade from their physical premises.

“Second, people stuck indoors for long periods of time took a look at tired décor or that home improvement project they had put off and decided now was the time to ‘B&Q it’ as the slogan goes.

“Arguably both of those positive tailwinds have disappeared while at the same time the powerful headwind of a cost-of-living crisis has made it extremely difficult for Kingfisher to make any headway.

“CEO Thierry Garnier may be right when he describes the results as resilient, but the message that ‘last year was a tough ask to follow’ isn’t really one investors want to hear, no matter how reasonable an excuse it might be.”

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