This week: Global equities soar while retail stores falter.
The New Year began pretty much as the old year ended, with equities continuing to chart a seemingly inexorable upward path.
Stock market indices touched record highs in the first three business days of 2018. In the U.S., the Dow Jones Industrial Average breached the 25,000 level for the first time, and both the S&P 500 Index and the Nasdaq also pushed into record territory. In the UK, the FTSE 100 Index moved into uncharted territory, closing 0.1% ahead and just short of the 7700 mark. The Nikkei 225 Average started the trading year with a 3.3% jump, its biggest one-day gain in more than a year and leaving the Japanese market at a 26-year high. Meanwhile, the FTSE World Europe ex UK Index was up 1.8% over the week.
Christmas is not quite over yet. It’s traditional to take your decorations down on Twelfth Night, which falls on Saturday, January 6. Although it’s fair to say (as one commentator remarked on social media) that if your breakfast still consists of Buck’s Fizz (mimosas) and Quality Street (candies), it’s time to look for a job…
But it’s never too early for the retailers who depend heavily on Christmas sales to take stock of successes and failures. In the UK, two of the first to reveal how they fared in the festive season were high street stalwarts Next and Debenhams.
The results have mixed. Of late, Next has been less a bellwether of retail fortunes, more a harbinger of bad times ahead. Falling profits and a slump in sales have been a feature of recent corporate news. But the clothing chain was able to deliver some comfort and joy to shareholders this week, announcing that full-price sales had increased by 1.5% in the eight-week run-up to Christmas Eve. Management attributed the improvement to a bout of cold weather. Investors welcomed the news, and Next’s share price was the FTSE-100 Index’s highest climber on Wednesday, up 7%.
In contrast, Debenhams took a tumble on Thursday after the revelation that its first week of post-Christmas sales had fallen below expectations. In the run-up to Christmas, sales at the struggling department store chain had been slightly ahead of the previous year, but that was the result of “tactical promotional action” – a euphemism for deep discounting in the face of competitors’ Black Friday promotions. Debenhams’ shares were down 20% as trading opened on Thursday morning.
Bricks and mortar
Debenhams’ travails – and, to a lesser extent, Next’s difficulties – highlight the perilous state of “bricks and mortar” outlets in the face of competition from the internet. A report from Springboard, the retail intelligence provider, said footfall in high street stores on Boxing Day (December 26) was more than 5% down on 2016. Meanwhile, in the U.S., shares in J.C. Penney moved sharply higher on Thursday morning after the department store operator delivered an upbeat trading update. Like-for-like sales in the nine weeks to the end of December were up 3.4%. The stock has lost close to two-thirds of its value last year – including 20% in a single day after a surprise profits warning in October. U.S. bricks-and-mortar retailers have also been under pressure by the rise of e-commerce, so the on the face of it, the update was welcome news for beleaguered investors.
It’s a familiar source of frustration: waiting (im)patiently in line at the bank, while someone tries to deposit the contents of their oversized piggy bank.
It could be worse, though. A BMW dealership in China’s Fuijan Province was forced to shut up shop in order to count out the loose change that a customer had used to pay the 70,000 yuan (around $10, 850) deposit on his new car. Apparently, the local businessman had been saving up his shrapnel for some time, but only decided that day what to spend it all on. Staff at the salesroom had to use every available surface to stack up the low-denomination coins. We’re sure the buyer must have been embarrassed at the fuss he caused.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security.
Indexes are unmanaged and are included for illustrative purposes only. You cannot invest directly in an index.