Must read: FTSE 100, B&M, Hays

GLOBAL MARKETS

FTSE 100 is trading flat, outperforming broader weakness across Europe. Retailers like JD Sports Fashion (LSE:JD.), Kingfisher (LSE:KGF) and B&M European Value Retail SA (LSE:BME) are under pressure after RBC cut its price target on JD to 150p from 185p and after B&M reported a slowdown in sales growth.

Meanwhile, Scottish Mortgage Ord (LSE:SMT) is the top gainer on the FTSE 100 today, perhaps reflecting a read across from the rebound in tech shares last night after the Nasdaq closed higher by 2.2%, with NVIDIA Corp (NASDAQ:NVDA) surging nearly 6.5% to an all-time high following its announcement of new AI products.

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B&M EUROPEAN VALUE RETAIL 

B&M kept its full-year profit guidance unchanged – it expects adjusted EBITDA of £620-630 million versus £573 million last year. However, sales growth slowed over the Christmas quarter to 5% from 6.2% in the first half, which has sparked nervousness among investors about a broader slowdown in retail demand amid the weak consumer backdrop. 

Discount retailers such as B&M have largely benefitted from the cost-of-living crisis as increasingly price sensitive consumers trade down to cheaper stores, boosting sales of its vast array of cut-price items. But with concerns about higher interest rates and the risk of a UK recession, the consumer strain may be starting to have a broader impact, affecting retailers even at the value end of the spectrum. While the Golden Quarter is typically the strongest and most significant period for retail, the post-Christmas lull and the confluence of macroeconomic pressures this January and February are likely to be quite painful.

Amid the sales slowdown, investors are struggling to get excited by today’s update, with shares in B&M under pressure, languishing near the bottom of the FTSE 100. Despite this, shares have still had a strong run over the past 12 months, with a market cap increase of almost a quarter.

HAYS 

Hays (LSE:HAS) has issued a profit warning – it expects first half pre-exceptional operating profit of about £60 million, missing analysts’ expectations, sending shares sharply lower. In its second-quarter trading statement it also said quarterly fees fell by 10%, hurt by weakness in December. But the recruiter said it is too early to tell whether this reflects a more sustained market slowdown. 

Shares in Hays plunged as much as 19% at one stage this morning and are still down by over 12%.

Hiring of permanent staff tends to ebb and flow with the economic cycle. The sluggish global growth backdrop combined with tighter monetary policy has dampened business appetite to pile on additional fixed staffing costs. And while temporary workers typically pick up the slack, Hays said it didn’t see the ‘normal seasonal step-up in worker volumes’ dealing a double blow to the recruitment firm.  

Today’s slide reverses much of the rebound in the stock seen since the lows in October. Over a 12-month period shares are down by over a fifth.