FTSE a step closer to hitting 8,000, Unilever has a volume problem, Iger takes the mouse by the ears at Disney and Watches of Switzerland sees jewellery sales slip

“At the current rate, we could see the FTSE 100 break through the 8,000 level by early next week, which would represent a long-overdue victory for the UK stock market,” says Russ Mould, Investment Director at AJ Bell.

“The market is up another 48 points today to 7,932 thanks to renewed takeover chatter in the banking sector, a well-received set of results from AstraZeneca and another leg up from the energy sector.

“Reports suggest First Abu Dhabi Bank is still interested in buying Standard Chartered, despite guidance to the contrary last month.

“If successful, it would represent yet another UK stock acquired by a foreign player. It would also play to the theory that industry players are more likely to buy UK-listed companies than private equity in the current environment.

“Whereas the sharp rise in the cost of debt has made life harder for private equity to do leveraged deals, a lot of businesses have come out of the pandemic in a robust financial shape and have plenty of cash on their books to buy rivals in their respective sectors.”

Unilever

“Has Unilever put its prices up too much? That’s the question after it once again reported a rise in revenues and a decline in sales volumes. While consumers have got used to everything costing a bit more in the shops, there is still a point where certain items become unaffordable, or where the price-point for a cheaper alternative is too good to ignore.

“Even though Unilever boasts some of the world’s most-loved brands, sometimes consumers have no other choice but to plump for generic versions due to their financial circumstances. And if you listen to what supermarkets have been saying recently, own-label products are flying off the shelves.

“Outgoing chief executive Alan Jope can boast ‘strong topline growth’ as his legacy, but under the bonnet it’s plain to see falling margins, declining sales volumes, and a confused approach to strategy.

“Jope’s replacement, Hein Schumacher, joins in July, by which time we may well see widespread evidence of inflation easing, but whether Unilever brings its prices back down is another thing.

“The new boss will need to think quickly about this point, as well as defining what Unilever should look like over the next decade. As ever with a business that has so many moving parts, we aren’t likely to see any radical changes for at least a year, but Schumacher’s in-tray is already going to be full before he’s even stepped in the door.”

Walt Disney

“The market seems pleased returning chief executive officer Bob Iger is grabbing the mouse by the ears and announcing a big shake-up at Disney judging by the share price action in after-hours trading.

“Like several big US firms of late, Iger is cutting jobs and once again investors have welcomed a drive for greater efficiency. It suggests he is serious about making the Disney+ streaming platform profitable after it announced its first fall in subscribers since launch in 2019.

“The simplification of the group’s structure to have three divisions – entertainment (TV, film and streaming), its ESPN sports network and Disney parks, experience and products – seems logical and it was notable that activist investor Nelson Peltz gave the changes his seal of approval.

“The linear TV business is in structural decline and having separated out sport, often the one thing people are still keen to watch live, it will be interesting to see the destiny of its other cable TV channels.

“Iger is off to a good start but if the sequel to his previous succession plan is to be better received than the original, he still has work to do in his remaining 20 months or so in charge.”

Watches of Switzerland

“The market did not like the latest numbers from Watches of Switzerland – with soft jewellery sales helping to undo a lot of the progress the shares had made so far this year.

“The company may be taken aback at the scale of the negative reaction to what were otherwise reasonably robust third quarter numbers accompanied by reiterated guidance.

“It suggests a degree of scepticism over its claims to be relatively insulated from weaker consumer demand thanks to a wealthier clientele and the continuing strong demand for luxury watches.

“Growth in the UK and Europe certainly fell behind the company’s US operations and Watches of Switzerland lamented the fact tourist demand in the UK had yet to return.”

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