FTSE 100 steady as housing market slumps, Frasers launches buyback, Joules in a pickle, rumours that Next might buy Made.com brand and Ryanair unveils record profit

“The FTSE 100 on Monday largely consolidated its gains from the back end of last week as investors continue to weigh the latest hints on Chinese Covid policy,” says AJ Bell Investment Director Russ Mould.

“Hopes that Beijing was done with Covid lockdowns entirely certainly look premature but even a slight shift to a more pragmatic approach would be taken positively by markets.

“After months and months of seemingly defying gravity, the housing market, like Wile-E-Coyote chasing Roadrunner across a gorge, has caught on to the pressures facing it and started to fall.

“The steepest decline in prices since February 2021 shows that soaring mortgage costs and other pressures on consumers are affecting buying appetite, even if supply remains constrained.

“Housebuilder shares have largely priced in a big decline in the market and were only slightly lower in early trading.

“Frasers, rumoured to be among the bidders for collapsed online sofa seller Made.com, pleased investors with news of a £70 million share buyback. The capital return on its own is pleasing but it also says something about the financial strength and robust outlook for the business despite a difficult retail backdrop.”

Joules

“The curse of the wrong type of weather has struck again, with Joules saying that sales of jumpers, coats and wellies have disappointed because the past few months have been relatively mild. This is disastrous for Joules because it was already struggling and needs every possible penny hitting its tills to help put the business back on track. Discussions to raise more money are ongoing and founder Tom Joule is seen as a potential saviour on this front. This puts the entrepreneur in a difficult situation – does he hand over yet more cash to keep the ailing business from collapsing, or does he stand aside and hope that his creation finds an alternative way of staying afloat without him risking more money?

“The fact Next pulled out of investment talks in September with the retailer would suggest Joules could unwind as easily as a cat pulling yarns from a woolly jumper. The clock is almost certainly ticking with regards to getting more cash through debt or an equity investment.

“Next might have taken a page out of Mike Ashley’s playbook – wait in the wings in case the target goes into administration and then pick up the brand on the cheap. This strategy would mean Next doesn’t have to bother with the operating business and its associated problems.”

Made.com

“Joules’ products almost certainly have cross-over appeal to Next’s customer base in the same way that Made.com’s sofas would appeal to its home products shoppers.

“Chatter that Next could buy Made.com’s brands and intellectual property out of administration make perfect sense. While the market conditions are currently tough, Next will have an eye on the long term and a small outlay now to buy certain Made.com assets could reap big rewards down the line.”

Ryanair

“There’s always a lot of noise around Ryanair with its founder and CEO Michael O’Leary seemingly subscribing to the maxim that there’s no such thing as bad publicity.

“However, there is no question that Ryanair is good at budget air travel and its latest first-half results underline that point.

“To post a record profit so soon after the pandemic is astonishing and speaks to the market share gains the Ryanair has eked out as smaller rivals lose altitude, with the target for passenger numbers increasing significantly.

“O’Leary was notably dismissive of inflation and cost-of-living pressures on the business, suggesting both that Ryanair has got its pricing right but also that people are continuing to prioritise jetting away over other discretionary spending. The company is also benefiting from a return of people travelling for work purposes.

“Further turbulence for Ryanair cannot be ruled out but, judging by current trading, the outlook is good out to the end of O’Leary’s current contract in July 2024. Little wonder the company is keen to tie him down for a further four years.”

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