Must read: miners and oil stocks, Pets at Home, Halfords, Britvic, Man United

A stock market recovery since mid-October has ended abruptly for some companies, although others continue to do well. Our head of investment rounds up all the action.

GLOBAL MARKETS 

European markets have opened mostly higher, lifted by positive momentum after a strong session on Wall Street ahead of the Fed’s meeting minutes tonight and while European flash PMI readings come out this morning. In the shortened US Thanksgiving week, the Dow gained almost 400 points last night on the back of dovish Fed speak, some better-than-expected earnings and thinner than normal volumes. 

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The Dow is trading in the red, while the FTSE 100 is outperforming as oil and mining companies lead the charge. Oil prices are trading higher following a bigger-than-anticipated drop in US crude inventories last week.

PETS AT HOME

Pets at Home Group (LSE:PETS) reported first-half underlying pre-tax profit down 9.3% to £59.2 million, sending shares lower. Revenues increased by 7.3% to £727.2 million while the British pet supplies retailer kept its full-year guidance unchanged. 

The retailer enjoyed a major tailwind during Covid thanks to a surge in demand for pets. Pet shops were in the lucky part of the retail space that was categorised as essential and therefore allowed to remain open throughout lockdown.

Last year, Pets at Home revenue topped £1 billion for the first time, but it has since pulled back since the economy’s reopening and the end of government restrictions. On top of that, the company has been grappling with the inflationary pressures from rising freight and energy costs. The cooling economic backdrop could also weigh on sales, particularly on more luxury services like grooming and more expensive accessories as households look for ways to reduce spending in the cost-of-living crisis. However, veterinary services and other essential spending on pets should remain relatively resilient to the downturn. 

Shares in Pets at Home have struggled this year, underperforming the wider market with a year-to-date loss of more than a third of their value.

HALFORDS 

Halfords Group (LSE:HFD)s said it expects full-year underlying profit before tax to come in at the lower end of its £65-£75 million range, sending shares sharply lower. However, it plans to hire 1,000 automotive technicians in the next 12 months to fulfil its increased services demand. So far, Halfords says trading in the second half has been strong but discretionary areas have softened. 

Autocentres in particular have been faring very well while cycling pandemic boom has faded, hitting demand for bicycles. Service-related sales with recurring revenues continue to represent a key area for the group, while pressure on the consumer has dampened demand for some of the more discretionary higher ticket items as the macroeconomic pressures weigh.

However, Halfords said it is competitively negotiating freight at or below spot rate to offset the inflationary headwind. Plus, its acquisition of Lodge Tyre in October will result in service-related sales that account for 48% of the group once annualised, helping provide a boost to revenues. 

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Shares in Halfords have had a tough time this year, shedding around 45% year-to-date after plunging 27% in June after warning about inflation and lower demand for discretionary items. The company has echoed that message again today with another disappointing slide in its share price, reflecting the recessionary impact on consumer demand.

BRITVIC 

Britvic (LSE:BVIC) reported full-year profit after tax up 45.3% to £140.2 million on revenues up 15.5% to £1.618 billion, lifting shares in today’s trade. Plus, it raised its dividend by 19.8% to 29p but warned of an uncertain environment that makes forecasting the consumer difficult in the near-term. 

Britvic is well diversified geographically with key markets in the UK and Brazil but also in terms of its product range. The soft-drinks group sells Pepsi Max, Liptons and J20 at the value end as well as The London Essence, Plenish juices and Plenish plant-powered milks at the premium end, providing the business with diversification to weather an economic downturn. Although sales may be hit as we enter a recession, both the premium end and the value end are well positioned to navigate the macroeconomic pressures. 

Britvic has been struggling with a series of analyst price target downgrades lately and a declining share price. The stock is down around 16% year-to-date as the war in Ukraine and the broader market volatility weigh on its valuation.

MANCHESTER UNITED 

Manchester United Class A (NYSE:MANU) is trading higher by almost 10% this morning after the Glazer family announced plans to potentially sell the club a day after Cristiano Ronaldo’s departure, which would bring their 17-year ownership to an end.

Investors are cheering the news amid hopes that this could be the beginning of a new era for the club after a disappointing performance over the last few years. The expectation is that there could be a number of potential deep pocketed bidders including Sir Jim Ratcliffe who expressed an interest in buying Man U in August. Although the club was recently valued at £3.75 billion, the club has the potential to sell for much more than that. 

Shares are trading higher by more than 26% year-to-date.