Another new FTSE 100 record, Direct Line commits to cost cuts, Wetherspoon credits breakdancing pensioners, Boohoo’s debt and losses pile up

“The FTSE 100 continues to forge to new all-time highs with sterling weakness providing the index with a bit of a kicker,” says AJ Bell Investment Director Russ Mould.

“A fall in the domestic currency is typically helpful to the FTSE 100 because it boosts the relative value of its dominant overseas earnings.

“Currency traders are betting against the pound ahead of the Bank of England’s latest meeting tomorrow, amid a growing expectation it will cut rates earlier than counterparts at the US Federal Reserve.

“It’s extremely unlikely there will be any action tomorrow but the market will be watching the surrounding commentary for any clues on when the Bank of England might take the plunge on rates.

“Insurer Direct Line is looking to rebuild after a very difficult 2023 which saw it cancel its prized dividend. The company is looking to win back credibility with the market and the insurer’s first-quarter trading update saw it reaffirm cost-cutting targets.

“However, investors remain lukewarm and the longer the shares trade at a depressed valuation the more vulnerable the company looks to takeover attention – having batted off an approach from Ageas earlier this year.”

Wetherspoon

“The thought of pensioners, fuelled by caffeine, breakdancing in the aisles of Wetherspoon pubs might seem like you’ve woken up from a surreal dream, yet Tim Martin’s tongue in cheek comments suggest it’s happening across the country.

“Free refills of coffee, younger people discovering the joys of Guinness and a resurgence in real ale are among the reasons why Wetherspoon says profits could come in towards the top end of market expectations.

“The pub industry has experienced more than its fair share of ups and downs over the years, and the number of pubs has been decreasing steadily for decades. But one name has managed to keep its head above water and show the kind of resilience and stamina that a marathon runner aspires to, and that’s Wetherspoon.

“Its focus on value for the customer has paid off in spades and that’s a key reason why it remains one of the last men standing in the sector.

“While it cannot take full credit for the latest drinking trends, it can capture a lot of business by making sure it offers popular products at competitive prices and ensuring its pubs remain a pleasant place to visit.”

Boohoo

“Online fast fashion retailer Boohoo is finding life difficult and that’s clear in its full-year results.

“The numbers are a bit of a mess and that reflects a reset of the business through the course of the past financial year.

“While a material drop in revenue illustrates the fragility of the market backdrop, the trend did improve as the year went on.

“Importantly, Boohoo is sticking with its guidance for the current year that it will generate positive free cash flow. The company’s balance sheet is showing some signs of strain amid restructuring costs so cash generation is key.

“Capital expenditure is coming down as the company completes on its Sheffield automation centre and US distribution hub which should help, and Boohoo has reaffirmed its medium-term margin target.

“The company’s progress is somewhat hidden behind some weak headline numbers and this work will mean little if demand does not improve. The disposable nature of some of its products is at odds with a commitment to green issues, which appears to be particularly important to its core demographic of teenagers and young adults.

“The UK competition authorities are watching the business closely after a recent investigation into ‘greenwashing’ so Boohoo can’t afford to massage the truth about its supply chain and environmental impact.”

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