HSBC new boss goes on a tidying up spree, Mulberry rejects Frasers’ latest bid, Halfords pedalling fast to stand still, InterContinental Hotels hit by weak trading and Shoe Zone slips up

“The FTSE 100 started Tuesday on the back foot, dragged lower by weakness in the energy and telecoms sectors,” says AJ Bell Investment Director Russ Mould.

“Precious metal miner Fresnillo was in demand once again as gold prices remained at record highs but otherwise the unhappy story of broad-based losses from Monday afternoon continued for the UK’s flagship index.

“There was a reminder of the pressure Chancellor Rachel Reeves is under ahead of next week’s Budget as the UK’s public borrowing exceeded official forecasts in September. However, it was below the number which less optimistic independent economic forecasters had pencilled in.

“Taken at face value, home improvement retailer Wickes’ latest update was positive as the company reported robust like-for-like sales growth. However, enthusiasm may have been tempered by the fact this largely related to pent-up demand as customers caught up on projects which had been delayed by the poor summer weather.

“The company is still seeing pressure on demand for big ticket purchases and for its design and installation services for kitchens and bathrooms, although these have stabilised a touch in the most recent period.”

HSBC

“You can tell that Georges Elhedery likes things clean and tidy. The new boss of HSBC is making structural changes to the business so the group is primed and ready to grow under his leadership.

“His actions are akin to getting the house in order, clearing away clutter and putting things in the right place, before embarking on a new paint job and then thinking about expanding sideways or upwards.

“It feels as if Elhedery is focusing on what the bank does best. By combining the commercial and institutional banking operation, HSBC can bring together teams and strengthen the focus on a key target market.

“The creation of a new international wealth and premier banking division signals HSBC’s intent to be the bank of choice for the rich. The Middle East is expected to be a major opportunity for the group given its significant wealth and HSBC will want to have people on the ground ready to serve.”

Mulberry

“Frasers was never going to win the takeover battle for Mulberry with a bigger shareholder blocking its way. Challice owns 56.4% of the luxury goods retailer and doesn’t want Frasers to buy it. Whatever it says goes, given the size of its stake, and so Mulberry’s board have unsurprisingly rejected Frasers’ latest bid.

“The debate now shifts to whether Frasers will keep its stake in the business or whether it will push for Challice to buy it out and take the business private. There seems little point in Mulberry remaining a listed company if Frasers loses interest after the bid.

“Frasers has made it perfectly clear that it is worried about the path Mulberry is taking, saying there is ‘no current commercial plan, turnaround or otherwise’. Given that Frasers’ help has effectively been spurned by Mulberry rejecting its bid, it’s hard to see the Sports Direct owner wanting to hang around for long.”

Halfords

“Zero growth from Halfords in its first-half period isn’t as bad as it first looks. The company had tough comparative figures to beat from a year earlier, so the fact the business has managed to stand still rather than go into reverse has to be taken as a win. Indeed, investors have given the performance the thumbs-up, with a small rise in the share price.

“Consumers might not be feeling flush enough to splash out on expensive items like top-end bikes from Halfords, but there are certain things that need sorting out regardless. People who rely on their car to get to work need to spend on motoring essentials to ensure their vehicle is roadworthy. It’s Halfords’ job to ensure it is the company of choice to provide these services and its autocentres arm has shown progress.

“The weak spot once again was tyres where drivers are opting for budget ranges. At the end of the market, premium products have been awash with promotions across the sector.

“Halfords is increasingly leaning on its motoring services arm to drive earnings as that is where the future of the business lies. Despite this being more defensive in terms of people needing help regardless the state of the economy, it still comes with its own challenges. For example, wage inflation is high among qualified technicians and Halfords has no choice but to stomach these extra costs if it wants to ensure there are the right people in the business to do the work.

“Life is never easy for Halfords but the trading update implies it is keeping its head above water. The hard part is growing and it still has a lot more work to do.”

Intercontinental Hotels

“Holiday Inn owner InterContinental Hotels continues, like several Western businesses, to be afflicted by a weak performance in China.

“Traditionally the Chinese market is where companies went for growth, but recently it has been more of a graveyard for their ambitions and the slump in IHG’s revenue per available room in China is notably high.

“Last year’s figures were strong thanks to a resurgence in domestic travel but this outcome won’t do anything to quieten concerns about IHG’s performance in the country.

“Elsewhere, the picture is more positive and it’s significant that overall revenue per available room is higher in the third quarter, despite the weak Chinese showing.”

Shoe Zone

“Budget footwear chain Shoe Zone’s affordability credentials came to the fore during the cost-of-living crisis but the business has tripped up in 2024 thanks to higher shipping, energy and labour costs and, more recently, unseasonal weather.

“When you a produce a product where value is the key selling point you need to keep prices as low as possible. This means profitability and profit are vulnerable to any move higher in overheads and that’s been borne out by Shoe Zone’s recent experience.

“Blaming the weather is never a move which will get you in the market’s good books but at least trading ahead of the return to school, right at the end of its financial year, was strong.

“The company has been streamlining its estate, with an obvious impact on revenue, but a potential longer-term benefit if it is left with a higher quality portfolio of stores.”

These articles are for information purposes only and are not a personal recommendation or advice.