Daily market update: Revolution Beauty, Frasers, Boohoo, WPP

“The FTSE 100 held firm at the start of the new trading week as investors continued to wait for trade talk updates,” says AJ Bell Investment Director Russ Mould.

“Miners were higher despite weak data from China as the impact of the trade tensions between the world’s second largest economy and the US was laid bare. Exports to America plunged and there was evidence of continuing deflationary pressures in the latest consumer and factory gate price data.

“The figures created hope of further interventions from Beijing to stoke the economy and investors also looked ahead to talks between US and Chinese officials in London aimed at reaching an agreement on trade. Telecoms and utilities were among the sectors on the back foot in the UK’s flagship index.

“Despite tensions in Los Angeles, US futures pointed to only a modest retreat when Wall Street opens later today compared to the bumper gains recorded last Friday, which were driven by better-than-expected jobs data. US inflation readings for both consumers and producers are expected later this week along with consumer sentiment and inflation expectations data.

“These data points, along with any progress on US-China trade talks, could help shape sentiment in the coming days in the absence of many major corporate announcements.”

Revolution Beauty / Frasers / Boohoo

“Frasers is no stranger to clashing with Boohoo, having previously tried and failed to get founder Mike Ashley and restructuring expert Mike Lennon seats on the board of directors. The stage is set for another battle between the two companies in the quest to own Revolution Beauty.

“Frasers has confirmed it is running the numbers on the makeup and beauty products group which recently put itself up for sale. Frasers loves to grab a bargain and the share price collapse in Revolution Beauty means it is going for peanuts. Under normal circumstances, one might expect a deep-pocketed business like Frasers to seal the deal with ease. However, Boohoo owns 29% of Revolution Beauty and is unlikely to let its arch-rival swoop on this business without a fight.

“Revolution Beauty has so far proved to be a disastrous investment for Boohoo, having built up a stake at a much higher price than it is trading today. Boohoo can either hope to narrow some of its losses by someone like Frasers taking over the target at a chunky premium to the current market price, or it can buy the business outright and enact the mother of all turnaround stories to try and claw back its losses.”

WPP

“The fact WPP’s share price had more than halved over the past three years meant Mark Read’s days were always numbered as CEO. Shareholders can be patient, but there reaches a point where they can wait no longer and something has to change in order to revive the share price.

“Fundamentally, Read has failed to reposition WPP in the face of structural changes to the advertising industry. The rise of artificial intelligence and social media networks have meant that big clients have less of a need to use agencies such as WPP.

“WPP’s culture is rooted in traditional advertising and the world has gone digital, leaving the company scrabbling to play catch-up. Whoever replaces Read will have a big task in trying to modernise the advertising agency.

“The share price falling further on Read’s departure news is a sign that investors are all too aware of the problems at hand. This isn’t a simple situation where all that’s needed is fresh thinking from a leadership perspective. WPP needs a complete overhaul and that won’t come easily or quickly.

“The fact the company hasn’t got a replacement CEO lined up would suggest chaos behind closed doors. It could take another three to six months to find someone else, and by that point, WPP’s more tech-savvy rivals could be even further ahead.”

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