Richemont update triggers luxury goods rally, Renault motors ahead, Whitbread and Dunelm disappoint, Taylor Wimpey sees cost pressures, AI drives record quarter for TSMC, Trustpilot shines and Pearson delivers mixed update

“Investors were in a risk-on mood after a ceasefire deal between Israel and Hamas and a positive response to corporate results in the European retail, luxury, and automotive sectors,” says Russ Mould, Investment Director at AJ Bell.

“The Dax briefly hit a new record high as investors raced to buy shares in German e-commerce platform Zalando after it said full-year earnings would beat previous guidance. Strong customer growth paints a very different story to the UK retail market where shopkeepers are finding life hard in the wake of cost headwinds and an uncertain consumer backdrop.

“UK retail stocks were firmly out of favour, with Primark-owner Associated British Foods, JD Sports and Marks & Spencer among the top fallers on the FTSE 100. Investors were much more interested in bidding up miners, oil producers and pharma stocks, with these sectors helping to drive up the UK blue-chip index by 0.6% to 8,353.

“In France, shares in Renault motored 3.2% higher after the car maker said all its brands grew in 2024 thanks to product launches, with more new vehicle types to come in 2025. That helped to fuel interest in the stock and extend a rally that’s been in motion since last October.”

Luxury goods sector / Richemont

“Richemont put a sparkle on the luxury goods market after reporting a ‘very solid end’ to 2024 with a big improvement versus the first half of the year. That triggered positive read-across to names such as LVMH, Kering and Burberry as investors took Richemont’s update as a signal that the luxury goods sector’s slump was over.

“Investors were previously caught off guard when they presumed the cost-of-living crisis would not impact wealthy people and therefore the luxury goods sector would continue to thrive, but this turned out to be incorrect. Luxury goods companies saw a drop in demand and share prices were shaken across the sector.

“Richemont’s jewellery brands have enjoyed a big comeback, including Buccellati and Cartier, as lucky individuals were treated to something sparkly at Christmas. The bullish nature of the trading update has certainly got investors searching for opportunities across the sector, and took Richemont’s own shares to a new record high.”

Whitbread

“Premier Inn has a growth problem in the UK. Once again, the hotel chain’s owner Whitbread says its homeland operations are treading water and the business is not making solid progress with growing like-for-like sales.

“The backdrop is not favourable as consumers continue to watch their spending closely and the idea of a quick weekend away is off the cards for many people.

“Tough decisions in the Budget have hurt business sentiment and that’s causing jitters in the jobs market. At the same time, interest rates remain relatively high compared to the past decade and so households remain under pressure financially. People might find enough cash for a summer holiday, but many cannot also stretch to the short city breaks of which Whitbread is normally a beneficiary.

“In its defence, Whitbread has done a fantastic job planting flags across the UK and ensuring there is a Premier Inn in every major town and city. The brand remains one of the strongest in its field and it is a favourite among domestic and foreign tourists. People travelling on business are also happy to spend a night in its hotels.

“Strategically, Whitbread has achieved a lot and its expansion into Germany is going well. However, something needs to change to get the UK operations moving faster again. It’s precisely moments like this one that a company may be tempted to make acquisitions to accelerate growth. If it cannot achieve solid organic growth in the UK, Whitbread might need to get creative, but acquisitions don’t always pay off.”

Dunelm

“Dunelm’s mediocre festive trading update went down poorly with the market. Sales growth was minimal which has to be disappointing given it should have done well with people looking for good value homeware products to give as Christmas presents.

“Stronger margins and good growth with click and collect are positive factors. It’s also interesting to see Dunelm test the water with new initiatives such as a store inside a busy central London shopping mall and an acquisition to open more doors in Ireland. Expanding the brand’s reach is important to take the business to the next level.

“However, the fact the core business is only recording marginal gains would suggest Dunelm faces an uphill battle this year. Pressure on costs from Budget-related initiatives and a fragile consumer backdrop means the retailer will have to work extra hard to stay on track.

“The fact it has maintained full-year profit guidance comes across as slightly ambitious. There is a real risk that Dunelm’s trading deteriorates in the coming months because of the market backdrop rather than any fault of its own. It might have been better to take an ultra-cautious view of the outlook than hope for the best and subsequently disappoint the market.”

Taylor Wimpey

“While Taylor Wimpey’s 2024 performance was at the top end of some gloomy expectations it was hardly cause for shareholders to crack out the champagne.

“Yes, the balance sheet looks robust, helped by the timing of land purchases, but, as the businesses itself acknowledges, it needs mortgage rates to come down to drive demand and allow it to return to growth.

“It will hope soft UK economic data and the recent easing of inflation allows the Bank of England to go further on rates, otherwise 2025 could turn into another year of managed decline.

“The other factor returning to haunt Taylor Wimpey and its peer group is build cost inflation, which was easier to absorb when the property market was going gangbusters.”

TSMC

“The artificial intelligence theme looks to be alive and kicking based on chip maker TSMC’s latest record quarterly numbers. The company has carved out a dominant market position in manufacturing the powerful chips required to deliver AI and the latest quarterly numbers suggest it is building on its leadership status.

“Revenue growth is eye-catching and, in a sign of its confidence in the outlook, the company is set to spend big in 2025 to keep up with surging demand. Adding some risk to the chips story is the potential impact of any tariffs introduced by the incoming Trump administration.

“The sensitive geopolitical position Taiwan occupies is a risk customers must weigh but for now they appear to be won over by TSMC’s unmatched capability and capacity. While the business is diversifying its manufacturing base – building new plants overseas – it still expects the majority of this work to be done in Taiwan.”

Trustpilot

“Navigating the internet and deciding if you can trust the website through which you are ordering products and services is a key part of everyday life for millions of us. This is no surprise given the alternative is being ripped off or ending up with a substandard experience.

“In this context you can see why the reviews served by Trustpilot might be in heavy demand and, sure enough, its latest update reveals strong levels of growth and an earnings upgrade. It’s the kind of news which would earn a five-star rating with most shareholders.

“The more people use its site and post reviews, the more it derives network benefits. As more consumers use the platform and share their own opinions, the richer the insights the company can offer clients.

“Done well, this creates a virtuous circle where consumers feel drawn to Trustpilot because it is where meaningful services are listed and reviewed. The more consumers who use Trustpilot, the more businesses will feel they must engage with the company’s services.”

Pearson

“Academic publisher Pearson’s transformation from being an owner of media titles like the Financial Times and selling expensive physical academic books to a company at the forefront of digital education has not been without pain, but means it is now in a more sustainable place.

“The next frontier for the company to conquer is AI. The recently announced tie-up with Microsoft will help in this regard but in the here and now there are just a few niggles for investors.

“The company’s Virtual Learning and Virtual Schools businesses are finding things tough while the Workforce Skills arm is seeing slowing growth. At a group level growth feels modest, even if margins are improving and cash flow performance was robust.

“This latest update won’t earn Pearson detention with the market but neither can it be awarded top marks.”

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