FTSE 100 lower as debt ceiling worries linger, B&M demonstrates its value credentials and WH Smith banking on a summer travel recovery

“The FTSE 100 started Wednesday on the back foot. The deadline for an agreement on the US debt ceiling may have been pushed back from tomorrow to next Monday but with some hardliners in the Republican party coming out against the agreement its passage through Congress could be bumpy,” says AJ Bell Investment Director Russ Mould.

“Weak Chinese data also contributed to a subdued market mood with Asian stocks a little sickly overnight.

“Losing a finance director on the grounds of misconduct is never likely to do much for market confidence and it’s therefore no surprise to see Prudential trading lower today.

“The insurer didn’t provide much, if any, detail on the nature of the behaviour which led to James Turner’s dismissal although an insistence there were no implications for the group’s financial performance or reporting was probably enough to prevent a bigger sell-off in the shares.

“An acknowledgement from Ladbrokes owner Entain that it could face a hefty fine after a four-year investigation into bribery allegations put it on the back foot. The case relates to a former subsidiary in Turkey and the company’s inability to reliably forecast the size of any fine at least feels ominous.”

B&M

“During Covid B&M benefited as one of a handful of retailers which were able to stay open and operate. Its performance during this period therefore comes with an asterisk attached, which is why investors will be particularly pleased to see its value credentials paying off in a more normal retail environment.

“In theory B&M should be well placed against a backdrop where households are really watching their pennies and that is largely reflected in this latest trading update. The company is also generating lots of cash which it can return to shareholders.

“There is the odd warning sign here and there though, which the market may give some attention to. In particular, the company’s inventory position has increased a touch – hinting at a potential slowdown in non-food sales.”

WH Smith

“Pre-pandemic, WH Smith’s travel division was its jewel in the crown and the business is beginning to regain its shine.

“Benefiting from a captive audience of time-poor shoppers in airports and stations, the operation is able to generate healthy returns by selling a range of products from magazines, food and snacks to Bluetooth headphones.

“The company sees a big summer recovery as people jet off for their break in the sun and even the ongoing train strikes don’t seem to be denting the prospects for the travel arm to any great degree.

“With a pipeline of new stores being rolled out the company continues to execute a growth strategy which was on pause during Covid.

“All the while the high street operation continues to chug away quietly in the background – its stores may score poorly in consumer surveys but remain a profitable and cash generative part of the group. If that changes pressure may build to spin off the travel unit as a separate business.”

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