Market movers: house prices, WH Smith and Halfords

The conversation around UK house prices remains a popular one after this news from Halifax. Our head of investment also rounds up results from popular retailers.

European markets

European markets have opened lower, with all sectors across the Stoxx 600 in the red. Basic resources and the oil & gas sector are under pressure, leading the declines amid a drop in underlying Brent crude and WTI prices. 

The FTSE 100 is struggling, breaking below 7,250 with Coca-Cola HBC AG (LSE:CCH), Rio Tinto (LSE:RIO) and Entain (LSE:ENT) at the bottom of the basket, while Admiral Group (LSE:ADM) and Rolls-Royce Holdings (LSE:RR.) are outperforming. UK focus is on Liz Truss’ new cabinet and her plans to tackle to energy crisis this week. 

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Stateside, Apple Inc (NASDAQ:AAPL) gets set to unveil its latest range of iPhones, Apple Watches and potentially new AirPods as well.

Halifax house prices 

UK house prices rose by 11.5% in August year-on-year, down from the previous reading of 11.8% and grew by 0.4% month-on-month up from a drop of -0.1% in July. Wales outperformed while London lagged behind, but still saw the fastest house price growth in six years of 8.8%. 

We are starting to see tentative signs that the boom in housing could be starting to ease off. With rising mortgage costs, the threat of recession, sky-high inflation and the cost-of-living crisis, transactions in the housing market are expected to cool.

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With the uncertain macroeconomic backdrop, potential buyers may hold off before looking to purchase while homeowners may wait before putting their properties on the market.

Despite this the chronic housing shortage remains with demand still sharply outstripping supply (not helped by expensive build cost inflation), suggesting that even in a serious economic downturn, the UK housing market may still find support.

WH Smith

WH Smith (LSE:SMWH) enjoyed a 29% increase in travel revenue in the 26-weeks to 27 August versus the same period in 2019. The high street retailer said it anticipates a strong second half performance from travel to comfortably exceed pre-pandemic levels, in line with its upgraded expectations. However, shares are trading lower this morning after WH Smith disappointed some forecasts for a further profit upgrade today, dashing analysts’ expectations. 

WH Smith’s 1,100 airport, railway and hospital shops are providing a tailwind for the business with a post-Covid revival in domestic and international travel, boosting demand for magazines, snacks, medicines and other convenience items. Its travel business is driving the recovery and offsetting some of the pressures from cost inflation and squeezed household budgets. In June, quarterly earnings outperformed despite a cyber security incident at Funky Pigeon in April with that positive momentum continuing in recent months.

Investors have had a difficult ride with the stock over the last 18 months, with shares down more than 25% since March 2021. But over the last six months, shares have caught a bid, with the potential for further upward momentum if sales continue to perform well.

Halfords

Halfords Group (LSE:HFD) saw a 9.2% increase in total revenue for the 20-week period to 19 August. The British retailer continues to target full-year underlying profit before tax of £65 million to £75 million, and forecasts second half profit to exceed those of the first half. 

Shares in Halfords have jumped today, thanks to an upbeat trading statement with the retailer achieving near double-digit revenue growth for the period and sticking to its profit guidance.

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Despite this, shares are still down by 60% year-to-date with shares under pressure since June of last year. The company fared very well during the pandemic thanks to the boom in cycling. However, its warning that inflation was denting earnings and demand in June sent shares tumbling as the cost-of-living crisis weighs on the business. The shaky macro backdrop continues to be a major headwind for Halfords.