Closing summary
That’s all for today - here’s our main stories:
Goodnight. GW
FTSE 100 close
In the City, the FTSE 100 has closed at a new two-year high.
The UK’s blue-chip index ended the day 12 points or 0.16% to 7563 points, its highest close since late January 2020.
Financial stocks rallied, with Barclays, HSBC and Standard Chartered all up over 2% on expectations of higher interest rates this year (good for bank profit margins).
Travel stocks also picked up, with British Airways parent company IAG ending 2.7% higher, as worries about Omicron’s impact faded (France is lifting its ban on UK holidaymakers tomorrow morning).
But JD Sports was the top faller, down 6.4% after chairman Peter Cowgill sold a block of shares (see 3.21pm). Tech-focused stocks also weakened, following the losses on Wall Street, with industrial software developer Aveva down almost 5%.
Among smaller companies, housebuilder Countryside slumped 20% after this morning’s warning about poor trading.
M&S fell almost 8% despite reporting stronger Christmas sales - with traders disappointed that it didn’t lift its profit forecasts again.
Technology stocks are having a choppy day in New York, where the Nasdaq Composite index is now down 1% or 145 points at 15,043.
US STOCKS EXTEND FALL, NASDAQ DOWN ABOUT 1%. $NDQ
— Breaking Stock News (@UnusuallyActive) January 13, 2022
The selloff comes as average long-term U.S. mortgage rates jump to their highest level since March 2020, as lenders anticipate faster than expected tightening of monetary policy to combat US inflation.
there it is
— Brian Chappatta (@BChappatta) January 13, 2022
*U.S. MORTGAGE RATES JUMP TO 3.45%, HIGHEST SINCE MARCH 2020 pic.twitter.com/KT3kHKiXr4
The reality TV star Kim Kardashian and boxing champion Floyd Mayweather Jr are among celebrities being sued over their promotion of an alleged “pump and dump” cryptocurrency scheme that investors say caused them to lose money.
According to a class action lawsuit filed in a California court, executives of EthereumMax, in collaboration with Kardashian, Mayweather Jr and the basketball player Paul Pierce, sought to enrich themselves by making “false and misleading” statements to investors.
Promotions by the company included an Instagram post to Kardashian’s 250 million followers that the head of the UK’s Financial Conduct Authority, Charles Randell, said may have had “the single biggest audience reach in history” for a financial product.
The value of the company’s EMAX tokens increased by as much as 1,370% after the media marketing blitz before crashing to an all-time low, the suit claims.
By using celebrity endorsements, the claimants say, EthereumMax’s executives, “touted the prospects of the company and the ability for investors to make significant returns due to the favourable ‘tokenomics’ of the EMAX Tokens”. More here.
The episode shows the importance of vigilance in promotions involving cryptoassets, as Sushil Kuner, principal associate at the law firm Gowling WLG says:
This reflects recent concerns in the UK, with our Advertising Standards Authority (ASA) stating that monitoring cryptoassets, like Bitcoin, is a “red-alert priority”.
Back in London, shares in fashion retailer JD Sports have dropped 6% after it reported that chairman Peter Cowgill has sold 10m shares.
The sale leaves Cowgill holding over 9.7, shares in JD Sports, which yesterday lifted its profit outlook after a strong performance over Black Friday and Christmas.
Its US sales were also boosted by Americans spending their Covid fiscal stimulus cheques on items such as trainers and athleisure kit, adding up to £100m to profits.
Wall Street has opened higher, as traders welcome the easing in producer price inflation in December (see last post)
The Dow Jones industrial average of 30 leading US firms has gained 114 points, or 0.3%, to 36,404 points, approaching last week’s record high.
Aerospace manufacturer Boeing is the top riser (+2.6%), followed by Visa (+2%), Goldman Sachs (+1.4%) and Nike (+0.8%).
US producers hiked their prices last year at the fastest rate in at least a decade, but the inflationary surge may be easing.
The Producer Price Index for final demand surged by 9.7% in 2021, the largest calendar-year increase since data were first calculated in 2010, the U.S. Bureau of Labor Statistics reported today.
In December alone, goods and services providers lifted prices by 0.2%, a slowdown on November’s 1.0%, and October’s 0.6%.
PPI eased in December thanks to a 6.1% drop in gasoline prices, with prices for meats, gas fuels, fresh and dry vegetables, diesel fuel, and primary basic organic chemicals also dipping.
PPI for final demand advances 0.2% in December; services rise 0.5%, goods decrease 0.4% https://t.co/Jdh4JfaLGo #PPI #BLSdata
— BLS-Labor Statistics (@BLS_gov) January 13, 2022
These producer prices are passed onto consumers, who saw inflation rise at the fastest pace in 40 years last month.
Here’s Robert Frick, corporate economist at Navy Federal Credit Union, on the rise in weekly US jobless claims:
“Especially given the large adjustments in the post-holiday period, we can’t chalk up the increase in weekly unemployment claims to Omicron.
The level still remains near the historical average, and while that could change in the next month, with Omicron cases expected to peak in a couple weeks, it’s unlikely any increase would last long.”
The number of Americans applying for unemployment benefits rose last week to the highest level since mid-November, but still low by historic standards, Associated Press says.
U.S. jobless claims climbed by 23,000 last week to 230,000. The four-week moving average, which smooths out week-to-week blips, was up nearly 6,300 to almost 211,000.
The weekly applications, a proxy for layoffs, have now risen four of the last five weeks, possibly a sign that the omicron variant is having an impact on the job market, which has bounced strongly from last year’s coronavirus recession.
Altogether, 1.6 million people were collecting jobless aid the week that ended January 1st.
Companies are holding onto workers at a time when it’s difficult to find replacements. Employers posted 10.6 million job openings in November, the fifth-highest monthly total in records going back to 2000. A record 4.5 million workers quit their jobs in November — a sign that they are confident enough to look something better.
The number of Americans applying for unemployment benefits rose last week to the highest level since mid-November. U.S. jobless claims climbed by 23,000 last week to 230,000, still low by historic standards. https://t.co/DKOWzLEW9j
— The Associated Press (@AP) January 13, 2022
US jobless claims rise
The number of Americans filing new claims for unemployment benefit rose last week, suggesting that Omicron is leading to a rise in layoffs.
There were 230,000 new initial claims for jobless support in the week to Saturday 8th January, an increase of 23,000 from the previous week, on a seasonally adjusted basis.
Ignoring seasonal adjustments, the actual number of initial claims rose by 103,693 to 419,446.
However, the number of people who were already receiving support (the ‘continued claims’ total) dropped to 1.559m, the lowest level for insured unemployment since June 2, 1973.
#US #labour data: #InitialClaims jump to 230K vs. f'cast 200K Prior 207K, likely due to Omicron induced absences. BUT #Continued Claims plunge to 1.559 Mln, lowest since 1970! very tight labour market pic.twitter.com/4wU0ozrQoN
— Marc Ostwald (@MOstwald1) January 13, 2022
Despite rising, the initial jobless claims total is still around pre-pandemic levels, as this chart shows:
Weekly Initial Unemployment Claims Increase to 230,000 https://t.co/Zs7C9kSxqa pic.twitter.com/A3joT9tiuJ
— Bill McBride (@calculatedrisk) January 13, 2022
Updated
The health secretary, Sajid Javid, has confirmed that the time people with Covid in England have to spend in self-isolation is to be cut to five full days.
From Monday people would be able to leave isolation if they tested negative on day six, Javid told the Commons, a move which could cut the staff absences seen at the end of December.
Stocks of painkillers at UK stores ran lower last week, amid record Covid-19 infections and winter bugs.
Paracetamol was out of stock at 8% of stores surveyed by market researchers Kantar between Friday 7th and Monday 10th January, with another 21% of shelves running low.
Ibuprofen was either low, or out of stock, at a fifth of stores, after employee absence rates rose sharply at the end of December.
That’s slightly worse than in the run-up to Christmas, when 25% of stores were low or out of paracetamol.
Toilet rolls, fresh fish and frozen chips also ranked highly on the shortages list.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, says the data shows the impact of illness:
“The latest ONS data paints a picture of sick Britain as shoppers have stocked up on paracetamol, ibuprofen and toilet rolls as Covid cases surged.
Aches and pains, upset stomachs and runny noses saw demand for loo paper and pain relief soar, with the products in shorter supply.
Hospitality industry suffers 'lost Christmas' as sales slumped
UK pubs, bars and restaurants sectors suffered poor trading over the crucial festive period, new data shows.
Trading at hospitality venues slumped by 60% on Christmas Day, 31% on Boxing Day and 27% on New Year’s Eve, compared to 2019’s pre-pandemic levels.
The figures, from trade body UKHospitality and consultancy CGA, show that the sector suffered a ‘lost Christmas’ and cap off a devastating December in which the omicron variant hit takings hard.
That explains clearly why so many hospitality firms have few cash reserves at the start of 2022 (see 10.09am post), and some have little confidence of keeping afloat.
Venues in Scotland and Wales, where restrictions were tightened, saw the sharpest falls in trading.
UKHospitality CEO Kate Nicholls, said many firms racked up losses during December, rather than the usual profits they relied on, which will hit job creation and growth.
“December is a vital period for hospitality businesses, equal to three months’ worth of trading for many. These new figures are crippling for an industry already struggling but also spell disaster for the wider UK economic recovery, as ONS figures showed that overall growth in Q3 was driven by hospitality.
“These sales drops versus 2019, and also against our members’ projections before the onset of the new Omicron variant, will have taken most businesses from healthy trading for the month to painful losses, delaying the sector’s recovery and extending hospitality’s long covid. Cash reserves are severely depleted, and some businesses will struggle to survive the first quarter of 2022.
“This dreadfully disappointing December has further stymied our ability to deliver jobs, growth and investment at pace, which we all know is so crucial to the recovery of our economy overall.”
British fashion retailer Next has cut sick pay for unvaccinated staff who must self-isolate due to exposure to Covid-19, Reuters reports.
“It’s highly emotive but we have to balance the needs of the business with those of workers and shareholders,” said a spokesperson for the group.
He said unvaccinated workers who test positive will still receive Next’s full rate of sick pay.
Next’s move follows a similar one by furniture retailer Ikea.
Last month Covid rules in England were relaxed for people who have been vaccinated so they did not need to isolate if they were exposed to a positive case.
However, there was no change to the guidance for unvaccinated contacts of positive Covid-19 cases, who were still required to self-isolate for 10 days after their date of exposure to the virus.
Next’s policy shift means unvaccinated workers required to isolate after being identified as a close contact of someone with Covid could receive as little as the Statutory Sick Pay minimum of 96.35 pounds ($132.43) a week.
Updated
Persimmon has reported a bumper year with weekly sales up a fifth in the second half of 2021 compared with pre-pandemic levels thanks to a booming housing market driven by cheap mortgage deals and a stamp duty holiday.
The UK’s biggest housebuilder by market value said in a trading update that revenues rose 8.4% last year to £3.61bn as it completed the sale of 14,551 homes, up almost 1,000 on 2020, as the average price of a home rose from £230,534 to £237,050 year-on-year.
However, Persimmon said the spread of the Omicron variant has increased sickness-related absenteeism, with some customers delaying moving into new homes to follow government isolation advice.
Dean Finch, chief executive at Persimmon, said:
“Whilst the industry continues to face the ongoing operational and economic challenges as a consequence of the pandemic, particularly as the Omicron outbreak unfolded in the last six weeks of the year, the group continues to manage these ongoing challenges comprehensively,”
“The long-term fundamentals of the UK housing market remain strong and I am confident.”
A London-based online payments company has become Britain’s most valuable private fintech business after its latest fundraising valued it at $40bn (£29bn), handing its surf-loving founder a paper fortune of around $20bn.
Checkout.com, which simplifies payment processes for businesses, achieved the valuation following a $1bn investment that puts the stake of its 40-year-old chief executive, Guillaume Pousaz, at around $20bn.
Pousaz, a Swiss national, dropped out of university in 2005 when his father became ill with cancer and he then moved to California to pursue his love of surfing. It was only after running out of cash that he took up a job with International Payment Consultants, a payments processing firm, in 2006.
Pousaz told the Sunday Times in 2020:
“I didn’t choose payments — payments chose me.”
“I only took that job so I could go surfing.”
A year after joining IPC, Pousaz left to launch his first startup. He founded Checkout.com in 2012. More here:
UK diner numbers slumped at the start of this month, in another blow to hospitality firms.
The number of people dining out fell by 48 percentage points in the week to Monday 10 January, as Covid-19 infections ran at record levels. Seated diner numbers were 88% of the level in the equivalent week seen in 2020, OpenTable data shows.
Dining numbers began falling in late November once the Omicron variant emerged as a threat, as people cut their social contact.
In London and Manchester seated diners fell by 23 and 57 percentage points respectively.
Visits to high street stores and shopping malls also dropped. Overall retail footfall was down 6% in the week to 8 January, to 78% of the level seen in 2019.
According to @Springboard_, in the week to 8 January 2022, overall retail footfall in the UK decreased by 6% and was 78% of the level seen in the equivalent week of 2019 🛍 pic.twitter.com/WDsqjB7kVD
— Office for National Statistics (ONS) (@ONS) January 13, 2022
Full story: Marks & Spencer and Tesco enjoy strong Christmas
Marks & Spencer and Tesco enjoyed a strong Christmas trading period, partly as the rapid spread of Omicron prompted people to eat and drink more at home instead of heading out to restaurants and pubs.
M&S, which is recovering from years in the doldrums, booked its highest ever sales of food and a surge in clothing. Food sales jumped 10% in the three months to 1 January, compared with a year earlier, making it the fastest growing food retailer in the UK.
The strong rise in sales came despite fears of product shortages caused by supply chain difficulties including driver shortages and hold-ups at ports.
Clothing sales jumped almost 40% in the UK and more than 17% overseas despite a fall in sales at its high street stores. The company said the sales growth had come despite cutting discounting by two-thirds.
Steve Rowe, the chief executive of Marks & Spencer, said:
“Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value. Clothing and home has delivered growth for the second successive quarter, supported by robust online and full price sales growth.
“Food has maintained its momentum, outperforming the market over both 12 and 24 months. The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.”
The boost to food retailers from the Omicron wave was also confirmed by Tesco.
The UK’s biggest supermarket said sales rose 0.6% in the three months to 8 January – compared with the same period a year before. Tesco increased sales on 2020 when supermarket sales were boosted by the closure of hospitality businesses for many weeks across the UK.
Updated
Food and accommodation firms see cash reserves dwindle
The tumble in takings during the usually busy Christmas period has left more UK hospitality firms short of cash.
The ONS reports that 40% of all businesses say they have less than three months cash reserves, including 11% with none at all.
The problem is most acute in the accommodation and food service activities industry, with 54% of firms having under three month’s cash reserves, up from 44% in early December 2021.
Also, 17% of these hospitality firms have low or no confidence in surviving the next three months, the gloomiest outlook across the economy.
December is normally a bumper time for hospitality, letting firms build up cash reserves to see them through the lean times in January and February.
Last month, though, the plunge in bookings cost pubs, bars and restaurants over £10,000 each in the week leading up to Christmas, with fears that some will not survive.
ONS: Covid absences hit high
Around three percent of UK staff were off work at the end of last month due to Covid-19 - either infected, isolating or in quarantine.
That’s the highest since the data began in June 2020, as the first lockdowns were eased.
The Office for National Statistics reports that absences were highest in sectors such as hairdressing, saying:
In late December 2021, approximately 3% of the workforce were estimated to be on sick leave or not working because of coronavirus (COVID-19) symptoms, self-isolation or quarantine.
This is the highest the figure has been since comparable estimates began in June 2020; the other service activities industry, which includes hairdressing and other beauty treatments, reported the highest absence levels (7%).
3% of the workforce were estimated to be on sick leave or not working as a result of #COVID19 symptoms, self-isolation or quarantine in late December 2021.
— Office for National Statistics (ONS) (@ONS) January 13, 2022
This is the highest percentage recorded since estimates began in June 2020 https://t.co/n3o7nbcQFQ pic.twitter.com/P4wYihcP2Z
Covid-19 cases hit a series of record highs at the end of December, with the UK reporting nearly 190,000 new infections on New Year’s Eve.
Firms also reported a flurry of cancellations in December, as cautious consumers avoided hospitality venues such as pubs and restaurants.
Just over one-fifth of businesses reported increased cancellations from customers, including 44% of accommodation and food service activity firms.
21% of businesses reported increased cancellations from customers in the last month.
— Office for National Statistics (ONS) (@ONS) January 13, 2022
Nearly half (44%) of businesses in the accommodation and food service activities industry reported an increase. pic.twitter.com/dtRG2rrn0k
The pandemic is also driving up operating costs, with 8% reporting costs increased substantially and 47% reporting costs had increased a little.
Updated
Tesco is in a good position for 2022, despite today’s share price dip (currently -1.5%) says Chris Beauchamp, chief market analyst at IG Group.
“Tesco had been riding high into today’s statement, so they would have had to pull a huge rabbit out of their hat to avoid a decline in the shares. But we shouldn’t let today’s drop cast too much of a shadow over what was a solid statement all round. Sales up, a good Christmas, and market share thriving too.
“Overall it puts the UK’s supermarket titan in a solid place for the rest of the year, and even some additional share price losses in coming sessions should reflect some profit taking, rather than any disappointment around the numbers.”
While Tesco and Marks & Spencer were seeing strong food sales, hospitality firms were suffering from weak trading as the Omicron variant kept customers at home.
Pub chain Mitchells & Butlers has reported that a recovery in trading last autumn stumbled, after Omicron “led to calls for further caution in socialising”.
Its like-for-like sales had risen 2.7% in the 8 weeks to 20th November, but then tumbled 6% in the next seven weeks.
M&B, which runs the All Bar One, Harvester and Toby Carvery chains, adds that:
The adverse impact of Omicron being particularly felt in the most recent four weeks, over the important festive season, during which like-for-like sales have been down 10.2%.
M&B also warned that its costs are rising:
As previously announced, in the current year inflationary cost headwinds are expected to be higher than the normal pre-Covid level of £60m to £65m, due particularly to high levels of statutory wage rate increases and persistent historic high prices in energy markets.
FTSE 100 opens lower, led by Persimmon
Britain’s FTSE 100 index has dipped into the red this morning, having hit its highest levels in almost two years on Wednesday.
The FTSE 100 is down 12 points, or 0.15%, at 7540.
Housebuilder Persimmon is leading the fallers, despite reporting a 10% increase in revenues in 2021 - up to £3.61bn from £3.33bn, with new home completions rising from 13,575 to 14,551.
Victoria Scholar, Head of Investment at interactive investor, has the details:
“Persimmon reported total forward sales at £1.62 billion as of 31st December, up from £1.69 billion a year earlier and around 20% ahead of 2019’s pre-pandemic level.
The fundamentals of an upbeat demand outlook combined with constrained supply continue to point to a strong UK housing market with favourable conditions supportive of Persimmon and the broader sector. However headwinds remain with uncertainty around covid, rising interest rates and cladding related repairs. The sector has been struggling this week after the government called on developers to help pay for up to £4bn to fix the cladding crisis.
After a lacklustre performance in 2021, shares in Persimmon have seen no let up at the start of this year, heading back down in the direction of the October trough, erasing more than 75% of the fourth quarter’s double-digit gain. Today’s price action has seen an extension of the recent downtrend that started at the turn of the year.
UK housebuilder Countryside has announced the departure of its chief executive, and warned that trading is weaker than expected.
Shares in Countryside have tumbled 16%, after it reported that operating profits have more than halved year-on-year in the last quarter.
Trading in the first quarter of our new financial year has been below the Board’s expectations. We expect to update the market on progress with the review of developments in 8 to 10 weeks.
CEO Iain McPherson is to step down with immediate effect.
Countryside has also struck an agreement with activist investor Browning West, which has been pushing for change.
Peter Lee, partner at the US hedge fund, will join the board, with Browning West agreeing not to propose resolutions at general meetings or try to remove directors from the Board.
Updated
Greetings card chain Card Factory says trading is above expectations,
Trading recovered particularly strongly through December, with like-for-like store sales in the run up to Christmas returning to similar levels to those delivered in December 2019.
Card Factory has reported total sales of £337.3m since the start of February, ahead of the Board’s expectations.
That’s still sharply lower than pre-pandemic (it made £424.5m in eleven months to 31 December 2019), as restrictions forced shops to close at times last year.
Tesco’s shares have opened lower too, down 1.8%, despite lifting its profit outlook.
They’re still close to their highest level since 2014, though.
Michael Hewson of CMC Markets says:
As a result of the outperformance in Q3, Tesco said expectations for adjusted retail operating profits, which were revised up in the H1 numbers to between £2.5bn and £2.6bn, are now expected to come in slightly above that number. Shareholders seem a little less impressed, with the shares falling back in early trade.
This morning’s reaction seems ‘a little churlish’, but doesn’t mean Tesco shares can’t climb higher in the longer term, he adds:
M&S shares drop
Shares in M&S have....< drumrolls> dropped at the start of trading, despite reporting a jump in sales through the Christmas period.
M&S shares are down around 4.4%, suggesting that traders had already priced in a strong performance, and were hoping for more today.
Retail analyst Nick Bubb explains:
Well, “Super” Thursday is traditionally the best day to “bury” bad news about Christmas trading, given the huge number of companies usually reporting at the same time, but the field is a bit thin this year…and although we can’t see any bad news, we can’t see that much good news either, with the City likely to be disappointed by the lack of a profit upgrade at M&S…
M&S shares had rallied strongly in 2021, hitting the highest since May 2019, as it upgraded its profit forecasts twice. Today it only nudged that guidance higher, saying it was “more confident” in hitting those targets.
Updated
Tesco upgrades profit guidance on back of solid Christmas, M&S says confident of meeting its targets as ramps up sales - esp of full price clothing. But headwinds for high st intensifying as we go into 2022, from supply issues to mounting costs - and squeezed customers
— Dharshini David (@DharshiniDavid) January 13, 2022
ASOS: demand volatile as Covid-19 cases rose
Online fashion group ASOS is sticking with its recently downgraded guidance, after being hit by supply chain problems and rising costs.
ASOS has reported total sales growth of 5% in the last four months of 2021, including a 13% rise in the UK.
It says that the pandemic continued to disrupt business:
Supply chain constraints played out as anticipated, whilst market demand remained volatile due to significantly increased COVID caseloads across large parts of the UK, Europe, and the US.
Customer growth slowed, after surging earlier in the pandemic as lockdowns drove people towards home shopping. ASOS added another 300,000 customers, lifting its total to 26.7m.
ASOS issued a profits warning in October, with CEO Nick Beighton stepping down.
Mat Dunn, COO, says ASOS is delivering on that guidance “despite challenging market conditions”.
This performance reflects the strength of our offer, excellent customer experience and the dedication and hard work of all ASOSers. We continued to make progress against our objectives to improve the flexibility and speed of our retail model and accelerate the pace of delivery of our international growth strategy.
Looking ahead, while mindful of the near-term uncertainty relating to the pandemic, our guidance for the full year remains unchanged.
ASOS has also announced it moving to the Main Market of the London Stock Exchange, off AIM (the Alternative Investment Market, favoured by smaller firms).
Ross Hindle, analyst at research group Third Bridge, says M&S is outperforming its rivals (after years of lagging behind).
“M&S has served up a piping hot performance with total UK sales strongly beating consensus estimates.
“A resurgent M&S was Britain’s fastest-growing retailer over the Christmas quarter, as it made the most of favourable trading conditions in December.
“M&S was a big beneficiary of Britain’s appetite for at-home luxury as consumers sought to spend a bit more on the Christmas Cheer and make the best of another Covid Christmas
A well-executed restructuring has seen the Group outperform peers over the past 12 months, Hindle adds:
Fresher fashion labels, an improved website, and a more modern store environment are all building momentum, however it is the Group’s partnership with Ocado that continues to shine bright.
“The M&S and Ocado partnership has been a fruitful one for both parties with M&S products now accounting for nearly 30% of the Ocado basket. We expect this partnership to continue to blossom and our experts cannot foresee the rumours of a total buy-out by M&S materialising.
But,....there’s also more to do:
“Despite the positive performance, M&S is still plagued by structural challenges, especially in its Clothing & Home division. To complete its resurgence M&S needs to slim down its bloated clothing ranges, trim its high SKU count [the number of items for sale], and resolve its non-premium store locations.”
Richard Lim, CEO at Retail Economics, says Tesco’s focus on its Clubcard loyalty scheme is paying off -- especially as the cost of living squeeze tightens.
“The retailer’s single-minded focus on competitive pricing and driving loyalty through its Clubcard-only discounts has won over customers this Christmas. The use of Clubcard has been a masterstroke from the retailer, enhancing the perception of value and playing on the hugely powerful customer instinct of FOMO - the fear of missing out.
“Online continued to deliver strong gains as a wave of new e-commerce converts stuck to a new way of getting their groceries over Christmas. Sales growth was mightily impressive in the wholesale part of the business with Booker seeing double-digit growth as catering and convenience boosted sales.
“Looking forward, the imminent squeeze on incomes will force many households into recessionary behaviours, trading down to own-brand and shopping around as they look to make budgets stretch that little bit further. Tesco is well placed to win new customers with their laser-like focus on value as they double-down on their Clubcard success.”
Tesco says this morning that over 95% of its promotional sales are now on Clubcard Prices, with 8.5m customers now accessing Clubcard via its app.
Some snap reaction, from Retail Week’s Luke Tugby:
Tesco upgrades profit guidance after LFL sales in core UK and Ireland business jump 9.2% during crucial Christmas period, compared to 2019.
— Luke Tugby (@LukeTugby) January 13, 2022
Retail operating profit now expected to be "slightly above" the top-end of previously guided £2.5bn-£2.6bn range
And the FT’s Jonathan Eley:
Small upgrade at Tesco, "more confidence" at M&S and no further disasters at Asos
— Jonathan Eley (@JonathanEley) January 13, 2022
Updated
Introduction: M&S and Tesco hail strong Christmas trading
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Marks & Spencer has hailed a strong Christmas as the UK retailer’s turnaround strategy starts to pay off..... as supermarket chain Tesco upgrades its profit outlook.
M&S’s UK sales jumped by 8.9% in the last quarter, compared to pre-pandemic levels two years ago, a trading update just released shows.
In the last 13 weeks of 2021, food sales were 12.4% higher than in the last quarter of 2019, with M&S’s Retail parks and Simply Food stores “continued to outperform”.
Basket sizes increased, as customers used M&S for more of their everyday shopping -- perhaps splashing out on more high-end food to celebrate Christmas after a tough year.
Clothing & Home sales, which have long been a problem area for M&S, rose 3.2% compared with two years ago.
M&S says it is now “more confident” of hitting its recent upgraded profit forecasts of £500m -- unless new material restrictions or lockdowns are imposed.
M&S’s chief executive, Steve Rowe, said:
“Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value. Clothing & Home has delivered growth for the second successive quarter, supported by robust online and full price sales growth. Food has maintained its momentum, outperforming the market over both 12 and 24 months.
The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.”
In what retail analysts are calling Super Thursday, Tesco has raised its profit outlook, reporting strong sales at large stores and convenience outlets, with online sales significantly ahead of pre-COVID levels.
The UK’s biggest supermarket has reported a rise in Christmas sales, and declared that its market share is now the highest in four years.
Tesco’s UK like-for-like sales rose 0.3% year-on-year over the Christmas period, and were 8.8% higher than two years ago -- showing how grocers’ sales have benefitted from the pandemic.
Tesco says that it now expects retail operating profits slightly above its previous guidance, after stronger than expected sales this year.
Tesco CEO Ken Murphy says:
“We are delighted that we were able to help our customers have a great Christmas.
Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value and offered our strongest ever festive range.
This put us in a strong position to meet customers’ needs as, once again, COVID-19 led to a greater focus on celebrating at home. As a result, we outperformed the market, growing market share and strengthening our value position.
ASOS and Card Factory are also reporting results (we’ll get to them shortly...)
Yesterday, supermarket group J Sainsbury, sportswear/fashion firm JD Sports and homeware chain Dunelm alo lifted their profit forecasts
Today we also get the latest US jobless figures, which may show an impact from omicron on America’s labor market.
Britain’s Office for National Statistics releases its weekly healthcheck on the UK economy, covering indoor dining, store shortages, credit card spending and gas prices (among other indicators)
European stock markets are set for a subdued start, after US inflation hit its highest level since 1982 yesterday.
#Thursday mkts: Europe expected to open down, yesterday #FTSE100 near 2yr high. #USD continues to fall, 11wk low vs #GBP. #Gold up again. #Oil down from 2mth high. #Lumber 7mth high. Earnings today from #TSCO #MKS #ASC #HFD. #EarlyMorningCall 07:30amUK - https://t.co/B1fxa2jESa pic.twitter.com/kPefTCa92o
— Jeremy Naylor (@JeremyNaylor_IG) January 13, 2022
European markets set for a pause after subdued US finish https://t.co/KxRHpZoBzm @CMCMarkets
— Michael Hewson 🇬🇧 (@mhewson_CMC) January 13, 2022
The agenda
- 9.30am GMT: Weekly UK business insights and economic activity data
- 1.30pm GMT: US weekly jobless figures
- 3pm GMT: Federal Reserve governor Lael Brainard’s Senate hearing on her nomination to become Fed vice chair
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