Must read: FTSE 100 underperforming, new PM, Whitbread, THG

Rishi Sunak's appointment as prime minister has helped reignite demand for beaten-up UK assets like the pound, says Victoria Scholar.

European markets have opened mostly higher as investors digest the slew of European earnings including key reports from UBS Group AG (SIX:UBSG) and HSBC Holdings (LSE:HSBA) in the financial sector. Stateside, focus turns to big tech with low expectations for results from Alphabet Inc Class A (NASDAQ:GOOGL) amid diminishing ad spending sparked by fears of a global recession.

In the UK, some of the political uncertainty has been alleviated, helping to reignite demand for beaten-up UK assets like the pound as Rishi Sunak takes over as prime minister with a lengthy and challenging to-do list. The pound is trading just shy of $1.13, while the FTSE 100 is trading around the flatline with HSBC and Whitbread (LSE:WTB) at the bottom of the index after releasing results. Meanwhile THG Ordinary Share (LSE:THG)’s trading update has sent shares surging into double digits, lifting other retailers such as B&M European Value Retail SA (LSE:BME), Kingfisher (LSE:KGF) and JD Sports Fashion (LSE:JD.) towards the top of the UK market.

• Read about how to: Open a Trading Account | How to start Trading Stocks | Top UK shares

WHITBREAD

Whitbread (LSE:WTB) reported fiscal first half 2023 profits of £307.4 million, swinging from a loss of £19.3 million year-on-year. Total UK accommodation sales were 101% ahead of the same period last year (H1 2022) and 35% higher than before the pandemic. The group said Premier Inn Germany became profitable for the first time in the second quarter with a smaller loss of between £40 million and £50 million expected in the full year.

Premier Inn UK has enjoyed a strong summer thanks to the release of pent-up demand for travel post pandemic which has helped to boost sales of hotel rooms. While sales have held up going into the third quarter so far, there is likely to be a reduction in demand with a post summer lull with schools going back and the warm weather fading.

Premier Inn is attempting to grow in Germany by attracting corporate customers and holding more conferences and trade fairs, which has helped to reduce the expected size of its full-year loss.

In its other brands, food and beverage sales continue to struggle, lagging pre-pandemic levels with pressures from cost inflation and wage increases as well as the challenge of attracting and retaining staff in hospitality post Brexit. On top of that, the war in Ukraine and the corresponding surge in energy costs are adding to Whitbread’s macroeconomic headwinds.

Whitbread’s shares have been attempting to regain lost ground in October, having come under pressure since February sparked by Russia’s invasion of Ukraine. Year-to-date the stock has shed 15%, in line with Hilton’s share price decline, underperforming the FTSE 100 and outperforming the FTSE 250.

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THG

THG Ordinary Share (LSE:THG) maintained its full-year 2022 guidance for revenue growth of 10-15% and adjusted earnings of £100-130 million versus £161 million last year. It comes after the retail group cut its earnings outlook in September after reporting a first-half pre-tax loss of £22.3 million. Third-quarter revenue grew by 2.1% with sales growth in its outperforming beauty division of 4.9%.

Beauty and nutrition enjoyed strong performances during the quarter, helping the group to maintain its full-year outlook. THG has managed to outperform depressed expectations, driving its share price considerably higher this morning.

The Manchester-based e-commerce group has been struggling with the cost-of-living crisis, which has weakened the consumer and sharply dampened demand, leaving less money left over at the end of the month for discretionary spending among households. It was once seen as one of the UK’s brightest tech hopes, but that has not been the reality with its share price down by more than 80% over the last year as investors including SoftBank nurse painful losses.