FTSE 100 consolidates recent gains, Trainline shares surge as Great British Railways threat melts away, H&M stuck in the mud and Hollywood Bowl under the spotlight next week

“The FTSE 100 started the day modestly higher, consolidating its big gains from yesterday but not showing signs of extending its rally,” says AJ Bell Investment Director Russ Mould.

“This may reflect the mixed messages coming from central banks this week. The market might be left feeling as if it has stepped through the looking glass. The Federal Reserve, despite a resilient US economy, is happy to talk rate cuts while the Bank of England and the European Central Bank, who face a much less rosy economic backdrop, are pouring cold water on hopes for a pivot.

“Perhaps the Bank of England and ECB remain concerned about energy prices and any possible inflationary pressures they might bring with winter upon us. America’s relative energy independence largely insulates it from this threat.

“Asian stocks pushed ahead as they reacted to the Fed’s dovish stance. The resulting weakness in the dollar tends to be good news for emerging markets.”

Trainline

“Trainline is gathering speed amid news the UK Department of Transport no longer plans to launch its own Great British Railways ticketing platform.

“This removes a potential competitive threat for the business in its core market and unsurprisingly investors have reacted accordingly and climbed aboard.

“Focus can now turn to the company’s efforts to expand in Europe, where rail travel is more reliable and affordable, and as it consolidates its position in its domestic market.

“Trainline is a well-known brand and its app has good functionality but the initial reaction to plans for a state-backed app, when the shares fell more than 20% intraday, shows it is vulnerable to fresh competition.

“Barriers to entry are relatively modest and Trainline can’t afford to rest on its laurels. But for now, the business appears to be on the right track.”

H&M

“H&M will be hoping for a last-minute rush of shoppers buying clothes for Christmas given how its fourth quarter period to the end of November was disappointing. Group sales fell by 4% in local currency terms in the period, representing three quarters in a row that the company has been stuck in the mud.

“Like a lot of fashion retailers, H&M has suffered from having too much stock which it needs to offload. The only way to do that quickly and efficiently is to sell these items at a discount. That’s bad for group profit margins.

“It’s not alone in having a bad year. Inditex has seen a slowdown in growth and ASOS and Boohoo are also finding life a lot harder. Consumers are being more cautious with spending on fast fashion and there is also fierce competition from the likes of Shein.”

Hollywood Bowl

“Monday 18 December will see Hollywood Bowl report full-year results to 30 September 2023. Bowling has proved to be a resilient leisure activity during the cost-of-living crisis and the underappreciated value in the sector even prompted a private equity takeover offer for bowling operator Ten Entertainment earlier this month. That’s put Hollywood Bowl under the spotlight, particularly as it is considered to be a higher quality company than its peer.

“A recent trading update hinted that the forthcoming numbers could be good so a key focus for the market when results are published will be any strategic initiatives to support growth. Ten Entertainment falling into private equity hands effectively puts pressure on Hollywood Bowl to up its game, particularly if the former is going to be used as an acquisition vehicle to branch out into other leisure activities.

“Hollywood Bowl has already planted flags beyond bowling with its expansion into mini golf via its Puttstars brand, as well as moving overseas with bowling in Canada. Any news on further growth initiatives could go down well with the market.”

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