Markets upbeat, Manchester United potential sale, Pets at Home hit by rising costs and Halfords sees profit at bottom end of expectations

“Despite the prospect of the Federal Reserve’s latest minutes reminding markets that it has no intention of taking its foot off the acceleration pedal for interest rate hikes, investors in the US, Asia and Europe seem remarkably upbeat ahead of the central bank’s announcement,” says Russ Mould, Investment Director at AJ Bell.

“Nervousness yesterday soon turned into a more upbeat mood, with the S&P 500 closing 1.4% ahead at 4,003. Asian markets woke up with a spring in their step, clawing back some of the recent losses caused by concerns over another Covid flare-up in China.

“The FTSE 100 was once again lifted by commodity stocks as oil prices move back up following a recent slump.

“Brent Crude started the year around the $78 per barrel level before racing ahead to $122 in June as the Russia/Ukraine war caused chaos in the energy markets.

“Oil has experienced a rapid pullback since the summer amid fears of a slowdown in corporate and consumer activity. Oil is a bellwether for the global economy and the prospect of a recession means a bleaker outlook for demand. Having bottomed out at $87.45 earlier this week, markets now appear to be taking the view that the oil price has fallen enough.”

Manchester United

“Fans have been wanting the Glazers to sell Manchester United for years and now it looks like their wish could come true. Having not won the Premier League since 2013, left its stadium in a shabby state and loaded up on debt, Manchester United has not lived up to its reputation as a winning football club of late.

“Anyone who bought the shares will have suffered the same frustration as a season ticket holder, with the stock offering so much promise but always failing to move up the top of the league.

“Football clubs in general have proved to be terrible investments over the years. Excluding the 11% after-hours jump in the share price on the potential sale announcement, Manchester United’s shares have fallen 30% in value over five years. Many people will find that a surprise given how well its brand is known around the world.

“Should the club find a new owner, the demands on its cash will extend far beyond securing the best players.”

Pets at Home

“Specialist retailer Pets at Home benefited from a significant expansion in the pet population during lockdown – a supportive trend it capitalised on well.

“Despite competition from non-specialist rivals like supermarkets, Pets at Home used its ‘everything under one roof’ offering, including veterinary and grooming services, to secure a strong market position.

“Pets at Home was also quite clever with its customer loyalty schemes – which came with relatively little cost attached but helped to drive repeat business.

“However, just like all retailers now, Pets at Home is exposed to rising costs and a customer base whose budgets are increasingly squeezed. Those pressures are reflected in a first half fall in profit.

“Britons may prioritise their pets when it comes to spending, but when they go into a Pets at Home store, they might just be buying the basics these days rather than extras like a new dog toy.

“All in all, it’s not the best start for new CEO Lyssa McGowan who had a hard act to follow. Her predecessor Peter Pritchard helped to lay the foundations for the company’s recent success.

“Investors will be hoping she can use her consumer-facing experience at pay-TV broadcaster Sky to better understand and serve its customer base during what is likely to be a tricky period.”

Halfords

“The big thing which may be worrying investors in cycling and car repairs and parts chain Halfords is the lack of consistency.

“It was only a couple of months ago that the company was saying it would hit its annual guidance but now it is guiding for earnings to be right at the bottom of expectations. This has helped stall the shares’ recent momentum and prompted a wave of profit taking.

“First half profit nearly halved as Halfords warned of a big softening in discretionary spending in its stores. Halfords can keep the car on the road if all people are buying are the basics, but it may not see accelerating growth.

“At least this underscores the logic of the current strategy of bolstering its motoring services arm, announcing two significant deals on this front in recent weeks.

“This offers more predictable, repeat revenue and would make the business more resilient to ups and downs in the consumer backdrop.

“Halfords is also seeing success from its motoring loyalty club which is pulling in cost-conscious motorists keen to secure discounts when the running costs of their vehicles have gone through the roof.”

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