Must read: FTSE 100 outperforms, China rally, 888, adidas
25th July 2023 09:09
by Victoria Scholar from interactive investor
Our head of investment rounds up the morning's big news.
GLOBAL MARKETS
European markets are trading mixed ahead of key central bank rate decisions this week. The FTSE 100 is pushing higher, inching closer to 7,700 with Unilever (LSE:ULVR) at the top of the charts following a strong earnings update, while Compass Group (LSE:CPG) has sunk to the bottom after its quarterly update came in slightly worse than analysts were expecting.
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Chinese markets rallied sharply overnight with property stocks jumping, the yuan hitting a two-week high and the Hang Seng gaining over 4% after the authorities pledged to support its stuttering economy. US markets are in rally mode with the Dow logging its 11th day of gains on Monday ahead of the Fed’s decision tomorrow. Focus turns to US tech earnings with Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Snap (NYSE:SNAP) due to report today.
888
888 Holdings (LSE:888) has appointed Per Wilderstrom as its new CEO starting from 16 October. It comes after Itai Pazner was removed as chief executive in January following an internal investigation into a failure to follow anti-money laundering processes after ‘best practices had not been followed’ sending shares sharply lower at the time.
Wilderstrom has over 17 years of experience in the industry having recently worked as CEO of Fortuna Entertainment and previously at Gala Coral Group and PartyGaming. 888’s executive chair Lord Mendelsohn said Wilderstrom ‘was the clear standout candidate to lead the group.’ He will receive an annual fixed pay of £676,000 and will be eligible to receive annual bonus and performance share plan awards.
Shares in 888 fell sharply by over 25% on Friday after it said its British licence was under review following an intervention from the Gambling Commission over a leadership bid from three industry veterans. They previously held roles at Entain, which is facing investigation over allegations of bribery. Talks with the trio have now ended. The appointment of Per Wilderstrom hopefully marks the end of the uncertainty around 888’s licence to operate in the UK, something the company will have no desire to jeopardise.
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It has been a difficult year for 888 with a record fine for William Hill, an investigation into its Middle East operations and the departure of its CEO. Wilderstrom’s appointment could open up a new, more positive chapter for the group. Reflecting this, shares in 888 are trading sharply higher today, extending the stock’s 2023 rebound. However, 888 remains lower over the past 12 months, sharply underperforming rival Flutter Entertainment (LSE:FLTR).
ADIDAS
adidas AG (XETRA:ADS) has upgraded its full-year earnings forecast. It now expects a loss of 450 million euros in 2023, versus its previous guidance for a loss of 700 million euros. It has lowered its Yeezy write-off guidance from 500 million euros to 400 million euros. There was a positive impact from the first sales of some of its inventory announced at the end of May and adidas said future Yeezy drops could further improve the company’s results. In the second quarter, in euro terms revenue fell by 5% to 5.34 billion euros and operating profit fell to 176 million euros versus 392 million euros year-on-year. However, gross margins improved by 0.6 percentage points to 50.9%. In a vote of confidence, JP Morgan and Exane BNP Paribas both raised their price targets on the stock following the quarterly update.
Shares in adidas are trading sharply higher today and were already up by over a third since the start of the year until yesterday’s close. Investors have been encouraged by new CEO Bjorn Gulden, who is attempting to navigate the aftermath of the disastrous partnership with Ye, or Kanye West, which was terminated last year. Despite Ye’s anti-Semitic comments, his Yeezy trainers continue to display strong demand, helping adidas’ full-year outlook as the sportswear giant offloads its remaining inventory, which is partly being donated to charity. Gulden’s next challenge is to navigate the consumer slowdown in the United States as well as weakness in the world’s second-largest economy, China.
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