Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Rolls-Royce

Rolls-Royce (LSE: RR) is a British multinational aerospace and defence holdings company. It is one of the world’s largest makers of aircraft engines, and operates in four different segments. These include civil aerospace, power systems, defence, and new markets.

After a disappointing set of H1 results, Rolls-Royce shares saw yet another decline. But this week, a number of director dealings were carried out. Most notably, there was a huge purchase of shares from Chairwoman Anita Frew. The purchase from such a senior director should improve sentiment surrounding the stock.

• Name: Anita Frew
• Position of director: Chairwoman
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 50,000 @ £0.83
• Total value: £41,300

• Name: Lee Hsien Yang
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 1,161 @ £0.84
• Total value: £980.23

• Name: Wendy Mars
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 2,156 @ £0.84
• Total value: £1,820.31

• Name: Sarah Armstrong
• Position of director: Chief People Officer
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

• Name: Rob Watson
• Position of director: President (Rolls-Royce Electrical)
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

Admiral

Admiral (LSE: ADM) is a British-based insurance company. It specialises in car insurance products, but also has a line of other offerings. These include home insurance, travel insurance, pet insurance, and van insurance.

The FTSE 100 firm released its H1 results earlier this week. Although profits slumped by almost half, the stock still shot up by 15% this week. This was most likely due to the announced special dividend of 15.8p. This would bring its total dividend to 60.0p per share. Investor sentiment was also further boosted when the Chairwoman purchased shares worth over £25,000.

• Name: Annette Court
• Position of director: Chairwoman
• Nature of transaction: Share purchase plan
• Date of transaction: 11 August 2022
• Amount bought: 1,181 @ £22.44
• Total value: £26,501.64

Dunelm

Dunelm (LSE: DNLM) is one of Britain’s biggest home furnishings retailers with an ever-growing market share. It operates over a 170 stores throughout the UK and offers over 50,000 products across a broad range of categories.

The FTSE 250 firm released its Q4 trading update not too long ago, and the interim numbers resonated well with investors. Nevertheless, its bottom line figure is yet to be released, and investors are wondering whether their expectations will be met. Therefore, the recent purchases by its CFO and another director could be an indicator of an earnings beat. The company is expected to report its official FY22 results in less than a month’s time.

• Name: Vijay Talwar
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 4 August 2022
• Amount bought: 9,670 @ £8.50
• Total value: £82,156.32

• Name: Karen Witts
• Position of director: Chief Financial Officer
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 1,174 @ £8.45
• Total value: £9,922.18

Types of shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s set of director dealings, a certain number of directors opted to purchase shares via their companies’ share purchase plans. This allows employees to purchase shares through automatic deductions from their pay. And this was the case with a number of Rolls-Royce directors, as well as Admiral’s Chairwoman.

The post Director dealings: Rolls-Royce, Admiral, Dunelm appeared first on The Twelfth Magpie.

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John Choong has positions in Dunelm Group. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The interest in Morrisons led to its share price rocketing. It was purchased by CD&R for just under £10bn, including debt. This equated to a 287p per share offer, over 60% higher than the pre-acquisition announcement price.

M&S (LSE: MKS) has proved itself as one of the hottest FTSE 100 stocks this year, delivering over 80% year-to-date returns. In mid-August, on the Morrisons news, the M&S share price jumped over 25% as investors saw it as another potential target. If this did occur, I think we could see the share price of the FTSE 100 stock explode.

Acquisition case for M&S

In my opinion, there are three key factors that highlight M&S as an attractive investment opportunity for a private equity firm.

The first is strong cash flows. The PE model rests on using large amounts of debt to fund an acquisition (called a leveraged buyout). The aim is to pay down this debt using the cash flows produced from the acquired company, building the PE firm’s equity stake in the company. The company can later be sold and the difference in starting and ending equity value is the return on investment. In order for this model to work, the company needs strong, stable cash flows. M&S has just that, delivering £296m cash in 2021.

Them there’s its large property value. One thing that’s particularly attractive about M&S and many retail grocery firms is the large amounts of property they hold. For example, at present, M&S has an estimated £1.8bn worth of property. This is attractive for PE firms because this property can be sold to help fund transaction costs.

The low-interest-rate environment is a broader factor that makes PE investment very attractive. This makes raising capital and sustaining debts very cheap. This is critical for PE firms as their whole acquisition model relies on using large amounts of debt.

Potential risks

Although the above factors highlight the attractiveness of M&S shares, there are still risks that must be considered if I were to consider a purchase. One such risk is the fact that although current interest rates are very low, many investors are expecting them to rise very soon to combat rising inflation. If this is the case, then it will make it harder to raise capital and PE investment will be less attractive.

M&S has already increased its online delivery presence through its 50% stake in Ocado. The pandemic has vastly accelerated the shift to online grocery shopping. While this is encouraging, it also means that M&S will have to compete with a much wider range of grocery delivery firms moving forward. It will have to successfully navigate this competitive landscape if it wants to carry on delivering good results. 

I think M&S is one of the most attractive FTSE 100 stocks for a PE acquisition that could drive a steep share price rise. But acquisition talk aside, I think M&S’s strong results and online presence could make it a great investment opportunity for my portfolio as an independent company. Those features that make it attractive to PE firms, make it attractive to me too!

The post Could this FTSE 100 stock explode in 2022? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The rising Tesco share price

It seems that there’s renewed interest within the grocery retail market from investors following the latest takeover bids for rival supermarket Morrisons. For a long time, these stocks have been out of favour with the market. And as a result, they have begun to look relatively cheap, in my opinion. Even after the recent rise in the Tesco share price, its price-to-earnings ratio only sits at around 25. That’s a relatively small premium to the historical industry average of 20.

But is the recent rise in valuation justified? After all, if investors are basing their decisions on a potential takeover of Tesco, I think they could be sorely disappointed. Personally, I’m pretty optimistic about the Tesco share price. Not because of a possible takeover, but rather due to the underlying performance of the business.

Looking at the latest set of results, the company published some promising signs of operational improvement. The revenue generated by its supermarkets has increased by nearly 10% compared to pre-pandemic levels. This indicates that the closure of restaurants and bars has pushed many individuals to take up cooking at home, with the habit seemingly sticking even after the hospitality sector reopened. And with increased investment being made in its online infrastructure, maintaining and expanding its market share in the face of increased competition seems likely in my eyes.

Some risks to consider

A notable problem that has plagued the grocery retail sector for years is a significant lack of pricing power. With so many competitors to fend off, Tesco is restricted in how much it can charge for its products. Consequently, its profit margins are exceptionally tight, sitting around 3%. Unfortunately, these margins might be about to get squeezed some more.

With governments issuing stimulus packages around the world to reboot their economies after the pandemic, inflation is on the rise. And for consumers, that means the prices of food and other necessities are increasing. With individuals looking to save money, many may turn to discount retailers like Aldi to buy their groceries. Therefore, to remain competitive, Tesco will likely have to absorb at least part of the cost of rising inflation. Needless to say, that doesn’t bode well for its already strained profit margins. And could start pushing the Tesco share price down.

The bottom line

Despite these risks, groceries remain an essential item for everyone. And the management team’s pursuits to expand and improve its offerings both in and out of its supermarket division could be a driver of steady future growth. Therefore, I would still consider adding Tesco to my income portfolio, even after its recent rise.

The post Why is the Tesco share price rising? appeared first on The Twelfth Magpie.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The surging Morrisons share price

The explosive growth started in mid-June following a takeover bid from Clayton, Dubilier & Rice (CD&R). The private equity firm tried to acquire the whole business for £5.5bn. Seeing the share price jump to match the offer is not that surprising. But after some deliberation, the management team firmly rejected the bid. They said the “Conditional Proposal significantly undervalued Morrisons and its future prospects”.

In my experience, a rejection of the first takeover bid is often followed by a higher bid by either the same or another firm. Personally, I had my doubts about another offer materialising given the size of the deal. However, it seems I was wrong on that one. Oppidum Bidco (a newly formed company indirectly owned by Fortress Investment Group) has just made a bid for £6.3bn that Morrisons has recommended.

This second bid again sent the Morrisons share price flying even higher. And it’s now trading around 265p per share. However, what’s odd is that the acquisition price (which has yet to be approved by shareholders) stands at 254p. So why is the share price higher?

What’s next, and what are the risks moving forward?

It seems that investors are convinced that yet again, another higher bid will be made for Morrisons. This has yet to be seen. But private equity firm Apollo Global Management has announced it’s in “the preliminary stages of evaluating a possible offer for Morrisons”. Meanwhile, there are rumours that Amazon may be looking to expand its existing grocery partnership with Morrisons into a full-blown acquisition.

Needless to say, if another larger offer were to be made, then the Morrisons share price could continue to climb. But to me, this is starting to look like speculation rather than investing. There’s no guarantee that another offer will be made. Not to mention that even if shareholders approve Oppidum Bidco’s offer, the deal may still not go through. 

The bottom line

Overall, my opinion on the business remains largely unchanged. The management team’s ability to adapt to rising competition and new shifts in consumer behaviour with home delivery has allowed the company to retain its market share and reward shareholders with a sizable dividend.

Therefore, if an acquisition doesn’t happen, the subsequently falling Morrisons share price could be an attractive buying opportunity for my portfolio. However, at its current price, I don’t see much upside potential left. I won’t be buying any shares today.

The post What’s going on with the Morrisons share price? appeared first on The Twelfth Magpie.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why’s JD Sports Fashion’s share price rising?

I think the share price increase is directly linked to the 11% decline seen last week. In other words, investors most likely saw it as a good opportunity to buy the share on a dip. Despite this being an awful year for retailers, JD’s share price has shown a robust increase through much of 2020. 

This, of course, is related to its performance. It’s last set of results did show a dent to performance driven by the Covid-19 lockdowns. But, it was still profitable and the company also maintained its full-year guidance. 

What’s next for it?

I’d brace for a downward revision when it updates investors on its financials next. This is because of the unprecedented impact of Covid-19 lockdowns. Non-essential retailers are closed in the current second lockdown. With restrictions on our public lives set to continue even after it comes to an end, bricks-and-mortar retailers will continue to feel the heat too.

But still, JD is likely to be in a good place, going by the fact that it’s in the running for buying up beleaguered retailer Debenhams. There are contradictory reports doing the rounds about whether it’s still in the race or not. We will know for sure after the lockdown ends later this week. 

In the meantime, it has won the appeal against the decision of the Competition and Markets Authority (CMA) to prohibit its acquisition of Footasylum. The CMA had expressed concern on the negative impact on shoppers because of this. But the Competition Appeal Tribunal, not persuaded by CMA’s reasoning, overturned this decision.

Acquisitions can come with their own challenges, as the acquirer takes on not just market share but also the weakness of the acquired company. But as I see it, that’s tomorrow’s problem. For now, the fact that it has got a go-ahead, coupled with its interest in Debenhams, suggests that JD Sports has the means to buy them. 

How’s the long term looking?

Even otherwise, I think JD Sports’s future is bright. We may still be in lockdown, but at least we can see the light at the end of the tunnel. Forecasts for economic growth in 2021 were looking up even earlier. I reckon they’ll be better still now that a vaccine is around the corner. Retailers should benefit from this. 

The verdict

Further, JD Sports is a financially healthy company that’s part of a growing industry. It’s little wonder that investors are positive on the stock — evident from the fact that its price is rising despite an earnings ratio of over 40 times. I’ve long been bullish on the stock, and don’t see any reason that should change. 

The post JD Sports Fashion is the fastest FTSE 100 riser today. Would I buy now? appeared first on The Twelfth Magpie.

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Manika Premsingh owns shares of JD Sports Fashion. The Motley Fool UK has recommended Experian. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One example of the former could be Associated British Foods (LSE: ABF).

Cheap UK shares

It’s easy to see why investors have been running from the £13bn-cap owner of Primark. Like many, the FTSE 100 company was hit hard by the first lockdown and the dramatic slowdown in retail sales. The second UK lockdown just makes things worse.

When combined with restrictions elsewhere in Europe, 57% of ABF’s total selling space is now temporarily closed. This will likely lose the company an estimated £375m in sales.

Notwithstanding this, ABF would be one of the very few retailers I’d consider buying at the current time. 

For one, the FTSE 100 giant is much more than Primark. The company actually has its fingers in a number of different sector pies, including sugar, agriculture, and ingredients. Now, this diversification won’t guarantee the share price won’t have further to fall, but it does make ABF a more defensive option than your typical listed retailer. It also goes some way to making up for the fact that budget-focused Primark doesn’t sell online.

Another reason to suggest now might be a good time to buy into ABF is that finances still look pretty solid. At the end of its last financial year (mid-September), the company had net cash before lease liabilities of £1.56bn. That’s a far better position compared to others in the market’s top tier.  

Trading at under 15 times earnings, ABF hasn’t been this much of a bargain for a while. Since clothes will always need replacing (and Primark’s value offering should appeal to shoppers during recessionary times), these cheap UK shares look to be anything but a value trap.  

Undervalued

Another stock that I think is too cheap right now is soft drinks company Nichols (LSE: NICL).

Sure, recent trading hasn’t been great. Like others in the space, Nichols has seen revenue and profits tumble over 2020. This has been due to lockdowns and the closure of shops and travel concessions that sell its drinks. Seen in this context, the fall of the Vimto-owner’s share price back to where it was during March’s market crash does make some sense. 

Like ABF however, I think there are reasons to be optimistic. The reinstatement of dividends back in June certainly smacks of confidence. I think it’s unlikely new CEO Andrew Milne would want to reverse that decision when he takes over the reins in January. The small-cap’s balance sheet is also in great shape. Nichols had almost £47m net cash in June.

A forecast price-to-earnings ratio of 16 for FY21 might not scream value but it’s important to put this in perspective. For years, Nichols traded far above this level, and justifiably so. Operating margins and returns on capital employed have long been consistently high.

Admittedly, I’m biased. I’ve held the stock for years. But I see the current price weakness as an opportunity rather than something to ruminate on. News of a falling infection rate and/or vaccine breakthrough could see these cheap shares fizz back to form.

The post Cheap UK shares: this FTSE 100 company looks a bargain to me appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Nichols. The Motley Fool UK has recommended Associated British Foods and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With this in mind, here are three FTSE 100 stocks popular with income investors that might be worth paying attention to in January.

Likely festive winner

Quick out of the blocks next month is clothing stalwart Next (LSE: NX). The company provides an update on trading — including its performance over the all-important festive season — on 3 January.

At a time when many retailers are struggling, Next is something of an exception to the rule. Sure, sales at its physical stores continue to fall, but the online part of the business, as you would hope/expect, is doing very well indeed.

Considering that the weather over the last few months has also been generally favourable to clothing retailers, I’d be surprised if there were any nasty shocks waiting for investors. Having soared a little over 70% in price in 2019 so far, however, I’m wondering if the shares need to cool off a little. The dividends are as secure as they come, but the yield has dropped to ‘just’ 2.4%.  

Even if you have no interest in ever holding the shares, I recommend reading its results anyway, if only to give yourself an insight into how a business should report to its owners. In terms of clarity, Next sets the bar.

Value trap?

Also providing an update on trading next month (8 January) is the UK’s second-biggest supermarket J Sainsbury (LSE: SBRY).

Times have been tough for the business following its failed merger with Asda at the hands of the Competition and Markets Authority back in April. Indeed, in a year when the FTSE 100 has put in a great performance despite Brexit headwinds, Sainsbury’s stock is down 10%. 

Contrarians and value investors will be running the rule no doubt and it’s quite possible that the share price could jump if CEO Michael Coupe announces that trading has been even marginally better than expected.  

On 12 times earnings for FY20, however, I don’t think the current valuation is worth getting excited about. The 4.6% dividend yield is undoubtedly attractive and covered 1.9 times by expected earnings, but this can be achieved elsewhere at less risk, in my opinion. 

Brexit bounce

A final top-tier stock worth tracking next month is housebuilder Persimmon (LSE: PSN). It’s scheduled to provide the market with an update on 15 January.  

With the threat of a Jeremy Corbyn-led government completely gone and a bit more certainty on Brexit, the shares have rallied strongly since the outcome of the election was announced, supported by a report from property portal Rightmove that demand from prospective buyers jumped in the first four days after the election. That’s got to be encouraging news for the York-based business. 

I must confess that I’ve never been Persimmon’s biggest fan as a result of the exorbitant pay given to executives and the far-too-regular allegations of shoddy workmanship from disappointed buyers. Nonetheless, I can’t deny that the investment case is enticing based purely on the financials. Margins and returns on invested capital continue to grow and the stock, still available for under 10 times earnings, yields a chunky 8.9%.  

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Following an awful 2018 and a spate of profit warnings, the return of founder and major shareholder Julian Dunkerton as interim CEO coupled with a cheap valuation and relatively strong finances, led me to believe the retailer could be a great contrarian bet. 

Having said this, there’s certainly no point denying that anyone holding the stock must be willing to endure the potential for even more pain in the short term. 

“A year of reset”

Let’s not beat around the bush. Today’s full-year numbers were pretty awful.

Following a “poor performance in the second half across all channels,” total revenue for the year to 27 April was flat on the previous year at almost £872m, with gross margin falling 2.5% to 55.6%.

Underlying pre-tax profit came in at £41.9m — a near 57% reduction on the £97m achieved in the previous year as a result of extensive discounting at its stores.

On a statutory basis (taking into account non-cash onerous leases and impairment charges of almost £130m), a pre-tax loss of £85.4m was recorded, compared to £65.3m of profit the year before. 

To make matters worse, the company also elected to slash the final dividend by a little under 90%, from 21.3p to just 2.2p per share, leaving a total payout of 11.5p per share and a trailing yield of 2.7%.

And if that’s not bad enough, the next financial year looks like it will be equally tough for the business. Taking wobbly consumer sentiment and the need to “rectify” its product range into account, Superdry’s management now regards FY20 “as a year of reset.”

While new initiatives have yielded “small positive results,” revenue is expected to show a “slight decline” in the new financial year and particularly in the first six months as management continues to address the problems created by Superdry’s previous board. Increased spend in areas such as marketing are also likely to offset cost savings made elsewhere. 

If you ask me, a lot of this is already priced in. Based on the sharp recovery in Superdry’s share price after this morning’s initial sell-off, it would seem others agree.

Good value

Superdry’s stock was trading on a forecast price to earnings (P/E) ratio of just 9 before markets opened this morning. Although there’s likely to be a degree of adjustment to analyst expectations in response to the subdued outlook statement, I still think the shares offer value, particularly as the company’s finances continue to look in far better shape compared to other retailers (net cash position of £35.9m). 

In addition to this, it’s clearly far too early to judge whether Superdry’s new management team will be able to achieve its goal of stabilising the company and returning it to growth. As Dunkerton remarked this morning, current issues “will not be resolved overnight.“

As such, I’ve decided to retain my (small) position in Superdry with the expectation the share price is likely to remain under the cosh for the rest of 2019 (and probably most of 2020).

If and when Dunkerton’s turnaround plan shows any indication of working, however, I think those investing at these levels could be richly rewarded. 

The post Here’s why I’m sticking with this struggling growth stock appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Superdry. The Motley Fool UK has recommended Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Priced at 255p a pop back at the beginning of 2018, the shares fell 90% to end the year a little under 26p following a couple of profit warnings. 

Based on today’s trading update for the 18 weeks to 29 December, it looks like 2019 could be just as tough for the Rochdale-based firm and its investors. 

Revenue up, but…

At first sight, it doesn’t seem so bad with the company growing revenue “across all channels and all major product categories“. Total revenue rose 14% to a little over £102m. Online sales jumped 28% to £36m and have now contributed a third of total revenue for the year-to-date. Revenue from retail stores was also up 5% to £63.7m.

So, why were the shares down 13% in early trading? Much of this is likely due to the news that gross margin for the full year will now be “lower than previously anticipated” as a result of Footasylum needing to offer more promotions to entice shoppers to buy from the company rather than from rival retailers. This pretty much negates all of the previous positive talk about rising revenues. 

Another reason is the (unsurprisingly) downbeat outlook. According to the company, trading conditions experienced over the first half of its financial year “have continued throughout the Christmas trading period“, leading it to state that its short-term future is “undeniably challenging“. As a result of its desire to focus on cash and working capital,  a cost reduction plan was also announced which may generate some exceptional costs in the current financial year. This means that adjusted earnings will now be “towards the lower end” of analyst forecasts.

I’ll admit to becoming rather interested in Footasylum when it began falling early last year. However, with consumer confidence now likely to remain weak for some time, especially with Brexit just around the corner (at least officially), I’ll continue to steer well clear. At a time when other retailers are closing stores in order to preserve cash, its decision to open five new sites (and upsize three others) in time for Christmas looks increasingly misjudged. There could be further pain ahead for those still holding.

Price jump

Also reporting today was lifestyle clothing and accessories business Joules Group (LSE: JOUL). 

Although its share price didn’t suffer to quite the same extent as Footasylum’s, many investors still chose to dispose of their holdings in the small-cap over 2018. From a peak of 387p back in June, the shares had fallen 37% in value before this morning’s trading update was released to the market.

The reaction to the latter, however, couldn’t be more different with the stock jumping 5% in early trading. 

Retail sales increased 11.7% over the seven weeks to 6 January with growth seen “across all the brand’s product categories” and almost half of these sales achieved online. Crucially, management continues to believe that pre-tax profit for the full year will be in line with expectations. With many retail stocks issuing warnings, this is pretty encouraging stuff.

On 18 times earnings before this morning, Joules isn’t cheap to buy, but it’s surely a more palatable option than Footasylum. Interim numbers for the six months to 25 November will be released in just over two weeks. 

The post This nightmare growth stock fell 90% in 2018 and there could be worse to come appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Retail analyst Springboard has reported that footfall across the nation’s stores at the sales had fallen 3.1% by 4pm on Boxing Day, marking the third year in a row of declining volumes. That’s not the full day, of course, and it doesn’t include online sales, but with sales discounts being hiked increasingly further year-on-year, it doesn’t look like good news for the shops.

Online too

Though we don’t yet have any online sales figures, that sector of the retail business is not immune from the tightening of consumers’ belts, as the slump at ASOS has shown. ASOS, a pioneer of online fashion sales (and still a great growth prospect in many investors’ eyes) has seen its share price fall 45% since the release of a profit warning on 17 December — and the price is down 67% since the start of 2018.

But I don’t actually see Boxing Day sales weakness as such bad news, and I think 2019 could be better than expected, for a couple of reasons.

Changing habits

One is that Boxing Day is becoming less important as a shopping day, with attempts to part buyers from their cash starting earlier in the year these days. It’s surely not mere chance that the decline in Boxing Day sales has been coincident with the UK’s adoption of the US Black Friday tradition.

The other, as already hinted, is the increasing move to online sales. According to Barclaycard, almost 70% of people it surveyed who intended to shop in the Boxing Day sales planned to do so online, from the warm comfort of their own homes rather than trudging round the cold outdoors.

Some good news

And even for actual bricks and mortar shops, the news isn’t all bad. London often leads the way with retail trends, and West End shops were apparently reporting a 15% rise in footfall compared to Boxing Day 2017. Admittedly, Oxford Street might seem like a more tempting prospect than many provincial town centres, and some discounts were apparently very high this year. But I think retail investors should still take cheer from it.

How has the market reacted to these first snippets of information on the post-Christmas retail scene? Not with horror.

Don’t panic

Shares in Marks & Spencer started a shade under 1% up as the market opened after its Christmas break, so there’s no obvious panic fallout there from these early Boxing Day results. Next shares opened with a 1.5% gain, so it’s perhaps attracting a shade more optimism — and that wouldn’t surprise me, as it’s always looked like a better investment to me.

Looking to the big two in online fashion sales, ASOS shares opened up 1.1%, beaten by Boohoo with a gain of 1.8%. In fact, other than a couple of red figures, the retail stocks picture is mostly coloured green as I write these words on the morning of 27 December.

Early gains are mostly ahead of the FTSE 100 too, so I don’t see any need for post-Christmas retail panic.

The post I think 2019 could be the turning point for high street stocks appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group and Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.