Must read: ECB forum, Thames Water, Moonpig, H&M, De La Rue

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS

The FTSE 100 is lagging European markets this morning, which have opened mixed. The UK index is being dragged down by B&M European Value Retail SA (LSE:BME) after its first quarter trading update disappointed investors.

Retail is very much in focus today with B&M, Hennes & Mauritz AB Class B (XETRA:HMSB), and Moonpig Group Ordinary Shares (LSE:MOON) delivering updates. Also, Ocado Group (LSE:OCDO) is outperforming near the top of the FTSE 100, attempting to recover lost ground having slumped on Wednesday after Amazon.com Inc (NASDAQ:AMZN) reportedly denied reports that it could bid for Ocado. Recent speculation of a US tech giant takeover had been supporting shares in the supermarket technology business recently.

Barclays (LSE:BARC) is also at the top of the FTSE 100 after Citigroup raised its price target to 300p from 285p. However earlier this week JP Morgan cut its target price to 180p from 210p. 

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Central bank talk has been taking centre stage this week with Fed Chair Jay Powell, ECB President Christine Lagarde and BoE governor Andrew Bailey among the central bankers gathering in Portugal, all suggesting that there’s more work to be done to tackle inflation. Meanwhile, this morning Sweden’s Riskbank raised its key policy rate by 25 basis points to 3.75%, its seventh consecutive hike. 

Concerns about Thames Water are in focus after ministers discussed contingency plans to temporarily nationalise the utility. The embattled water giant is struggling with heavy debts, the departure of its CEO, a sewage crisis, energy and chemicals inflation, and long-term underinvestment.

MOONPIG 

Moonpig reported full-year adjusted pre-tax profit of £48 million, ahead of expectations for £44.5 million. Revenue rose by 5.2% to £320.1 million, roughly in line with forecasts for £319.7 million. 

Moonpig appears to be successfully navigating the economic headwinds thanks to its loyal customer base and proprietary data, which allowed the greetings card platform to issue 84 million occasion reminders during the year. However, its experiences revenue slowed in the second half of the year because of the macroeconomic environment. It continues to focus on digital innovation with the launch of Moonpig Plus, its subscription service and voice message functionality. 

Shares in Moonpig are rallying today and are up by over 25% year-to-date, outperforming the wider UK market thanks to this year’s rebound in growth and technology.

H&M 

H&M reported fiscal second quarter operating profit of 4.74 billion Swedish crowns, beating forecasts for 4.07 billion but falling year-on-year from 4.98 billion. CEO Helena Helmersson said ‘the summer collections have been well received and the third quarter has got off to a good start.’ H&M is planning to open 100 new stores, mostly in growth markets, and close around 200 stores mainly in established markets. Online continues to be a key growth area with H&M generating around 30% of sales through e-commerce. 

The high street fashion giant has been dealing with the pressures of inflation through high raw material and freight costs as well as a strong US dollar. It has also had to deal with markdowns in relation to its sales in Q3 which have increased versus last year amid the weaker consumer backdrop. In order to deal with cost-of-living pressures, H&M has been focusing more on its COS brand, which is at a higher price point, appealing to customers with greater disposable incomes during these turbulent macroeconomic times. 

Shares in H&M have surged by over 10% today thanks to its upbeat commentary about summer sales. The stock has by nearly 50% year-to-date, outperforming its biggest rival, Inditex in percentage terms.

DE LA RUE 

De La Rue (LSE:DLAR) shares are trading sharply higher after the banknote printer kept its annual profit guidance unchanged, an upside surprise against the backdrop of recent profit warnings. Full-year adjusted operating profit hit £27.8 million down from £36.4 million year-on-year while revenue fell from £375.1 million to £349.7 million. 

De La Rue has been battling against the recent slowdown in demand for currency combined with the longer-term structural shift in consumer behaviour away from cash towards card and other forms of cashless payments. However, a bright spot comes from its authentication business, which is on track to exceed £100 million in revenues in 2024 after it agreed to extend its contract to manufacture data pages for Australian passports. 

De La Rue shares have surged by over 10% this morning but remains lower by nearly 50% year-to-date. Shares have been in long-term decline, under pressure over the last decade with today’s price action providing a small amount of near-term relief to shareholders.