Royal Mail owner swings to a loss and Burberry sets ambitious growth targets

“If the mini-budget was what made the UK economy and its assets sickly, today is the day on which some painful medicine is delivered in the form of the Autumn Statement,” says AJ Bell investment director Russ Mould.

“By trailing many of the measures Chancellor Jeremy Hunt has gone out of his way to avoid any surprises, with the key aim to placate international investors in gilts and the pound. These are the markets the government will be watching as they look to gauge the reaction.

“The FTSE 100 was a touch lower on Thursday morning after a weak showing on Wall Street following an ultra-gloomy outlook from department store chain Target which sparked fresh concern about the US retail sector.

“Online groceries firm Ocado continues to attract brickbats with hedge fund manager Kintbury Capital pointing to 50% downside potential in the shares, which have already more than halved year-to-date.”

International Distributions Services

“The owner of Royal Mail has swung to a loss thanks to weakness in its UK operations. Its gameplan is to become much bigger in parcels as we see a continued decline in the volume of letters sent. The strategy was looking smart during the pandemic when e-commerce sales boomed, but a normalisation of the market in 2022 has derailed the group.

“Competition is fierce in the parcels space and ongoing disruption from labour strikes has given International Distributions Services the reputation of being unreliable, which counts against it when a consumer or business considers which company should transport their goods.

“If you want a parcel to reach a destination swiftly, why risk using a courier that may not get from A to B without a problem?

“The overseas arm of the business is doing much better, although parcel volumes have declined as the covid boost for e-commerce fades and the macro-economic environment deteriorates.

“All in all, we have a business that is still failing to deliver its promise of becoming more efficient via greater use of automation as its physical labour force is causing widespread disruption. Debt is also increasing.

“It has talked about splitting the group into two if Royal Mail isn’t fixed quickly. That’s looking more likely as time goes on, yet one must question which investors would be happy to just hold shares in the UK business. It’s broken, battered and bruised with an uncooperative workforce and a large part of its business in steady decline. That’s an ugly combination.”

Burberry

“Having taken some time to get his feet under the table, Burberry chief executive Jonathan Akeroyd has outlined his plan to grow the luxury goods brand.

“It’s fair to say he’s not reinventing the wheel but a target to dOCDOouble online sales and get to £5 billion worth of annual sales is ambitious, though notably no timeframe has been put on achieving these aims.

“A plan to focus on the inherent Britishness of Burberry isn’t necessarily about parochialism but more about making sure the brand remains distinctive, with British designer Daniel Lee set to replace the previous Italian creative director Riccardo Tisci.

“Tisci did a decent job of breathing fresh life into the Burberry brand so won’t necessarily be an easy act to follow for Lee.

“The gradual reopening of the Chinese economy is helping Burberry and shareholders will be keeping a close eye on the latest missives from Beijing on covid given how important that market is to the company.

“The downturn in the global economy will also be an acid test of Burberry’s luxury credentials, as the clientele it serves should be less exposed to the pain associated with a recession.”

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