Daily market update: Burberry, Compass, Imperial Brands

“The FTSE 100 ticked higher on Wednesday after mixed trading overnight in the US and Asia,” says AJ Bell Investment Director Russ Mould.

“Significantly, the S&P 500 crept into positive territory for the year – no mean feat given the uncertainties and pressures facing financial markets. Investors are likely to be looking for further news on US trade deals with the 90-day pause on most reciprocal tariffs set to come to an end in July.”

Burberry

“Despite its results being slightly less bad than feared Burberry is not showing any complacency, with the luxury goods firm announcing some pretty radical steps in its continuing recovery effort.

“Having enjoyed a strong run going into these numbers as relations between two of its key markets – the US and China – seemed to thaw, the momentum has continued as investors reacted positively to the news.

“Former Coach and Jimmy Choo chief executive Joshua Schulman was brought into revive the company’s fortunes last July and he is pulling the classic turnaround lever of cutting costs, including a drastic planned reduction in the firm’s headcount.

“A strategy of trying to compete with higher-end rivals hasn’t worked out so it makes sense that under Schulman the company is returning to its historic strengths in classic outerwear products like trench coats and scarves. On top of this, the company has also broadened the range of price tags on its products.

“There has also been speculation about the future of creative director Daniel Lee. Like a new football manager, Schulman may want to get his own backroom team in to support his strategy.”

Compass

“Catering giant Compass seems to have lost its way a little bit based on the reaction of investors to its latest update.

“The first-half numbers themselves were impressive, even if growth slowed from an extremely strong showing in the first quarter. The decision to stick with current guidance implies a continued modest slowdown in the remainder of the year – although notably the growth the company is chalking up is significantly ahead of that generated by its peers.

“Underlying numbers were encouraging with net new business wins and client retention looking fairly robust, and the company’s services remain in demand as businesses look to outsource catering as a means of reducing overheads.

“Tariffs are unlikely to have too big an impact on the company, bar some unhelpful macroeconomic uncertainty, with its supply chains predominately local to the areas in which it operates.”

Imperial Brands

“Shares in Imperial Brands have been in demand with investors thanks to its generous buybacks and its relatively defensive qualities at a time when the economic backcloth has been unpredictable.

“However, news that CEO Stefan Bomhard is set to retire has given the shares a jolt, along with slightly more modest profit growth than expected in the first half. Bomhard, who took charge in July 2020, has focused the business on its core strengths in traditional tobacco and leaned into the company’s ability to generate substantial cash flow from these activities.

“This, in turn, has helped drive big returns of capital to shareholders, with the company achieving a total return of more than 100% since Bomhard took the helm.

“It’s understandable then that there will be some tangible disappointment at the news of his exit. His replacement, current finance chief Lukas Paravicini, will likely continue to pursue a similar strategy but may have to contend with increasing regulatory pressures in the long term.”

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