Greggs, Imperial Brands and Compass

“The FTSE 100 index is doing the very best to break through the 7,600 market and test the all-time highs seen earlier this year. Today it nudges up to 7,593 in early trading, helped by strength in oil stocks,” says AJ Bell Investment Director Russ Mould.

Greggs

“Sausage rolls specialist Greggs has become the latest victim of bad weather and weak retail footfall. People visiting its stores are spending more money with growth in average transaction values, yet it has suffered from a reduction in like-for-like transaction numbers.

“While you can argue that weather is a one-off issue, general footfall weakness suggests a more serious problem, at least in the short term.

“Greggs is clearly doing well with hot drinks and hot savoury items, as it has done for a long time, but the jury is still out on whether introducing the likes of ‘feta and beetroot dip with grains and lemon salad’ is a step too far.

“The idea of reinventing itself to a ‘food-to-go’ chain has been in motion for some time and the business has seen success with more mainstream items like lower calorie wraps and porridge.

“However, there is a danger that Greggs’ transformation is happening at the wrong time with consumers increasingly cautious about how they spend money. That may explain why Greggs has now flagged that it will be extending its value meal deals offer.

“The people running Greggs are smart cookies and they should know how to find a way to adapt to the challenging market conditions.”

Imperial Brands

“Tobacco firm Imperial Brands had a low hurdle to navigate with its first half numbers and the company cleared it. After a torrid spell for the share price centred on US regulatory changes and under-representation in certain parts of the vaping market, earnings estimates had been pitched fairly low.

“So, despite seeing volumes fall 2.1% in the first six months of its financial year and profit down too, the results were actually slightly ahead of expectations.

“The company reiterates its guidance for the full year, although this is predicated on a stronger second half, and a pledge to divest up to £2bn worth of assets within the next two years is also likely to have caught investors’ attention.”

Compass

“Catering giant Compass is often vaunted by investors for its consistent track record of success so when it fails to deliver it’s not a big surprise to see the company harshly punished by the market.

“Its first half results fall down on an area management had earmarked as a priority – namely improving profitability through higher pricing.

“In fact, the operating margin fell 10 basis points in the period to 7.5%. Despite the relatively downbeat results, the first to be reported under new chief executive Dominic Blakemore, Compass says it is on track to meet full year expectations. Today’s share price reaction suggests the market is not convinced.”

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