Daily market update: Markets rebound, Unilever, McCormick, Wetherspoons

A small rebound in European stock markets brought a sense of relief to the end of a turbulent week.

Oil prices eased back and the FTSE 100 advanced 0.5% to 10,113 thanks to a solid showing from banks and miners – the two main culprits for Thursday’s market weakness.

Unilever sprung to life as talk about selling its food brands intensified. The market has been awash with rumours all week and hearsay has now switched to confirmation, with McCormick named as an interested suitor.

Among UK mid-caps, private hospitals group Spire Healthcare jumped 8% on talk that Bridgepoint was preparing a takeover bid.

JD Wetherspoons

Cost inflation is like kryptonite for Wetherspoons whose superpower is offering punters cheap food, booze and coffee from multiple outlets. Over time, the business has consistently prioritised sales volumes over margins.

Wetherspoons continues to churn out solid like-for-like sales growth. However, even before the energy shock created by the Iran conflict, the company was seeing rising costs eat into its profitability. The increase in outgoings on staff associated with changes in the 2024 Budget and other pressures on its cost base are evident in its first-half results – though a big repair and maintenance bill is also a factor.

Wetherspoons hedges energy costs, which provides some insulation from the current price volatility in oil and gas, but it is unlikely to be entirely spared from the knock-on effects on suppliers and on consumer confidence.

The management team are in a tricky spot – increase prices by too much and they undermine their value credentials and potentially alienate a portion of their customer base. They may take the view that absorbing some pain in the short term is a price worth paying to protect the brand.

An outlook which is effectively a mild profit warning suggests that may be the approach which Wetherspoons takes. However, the backdrop remains unpredictable, and it is hard to say just how much it can shield its patrons from price increases, particularly as it needs to take account of a large debt pile.

The Works

Online isn’t everything if the economics don’t stack up. The Works has called time on web sales after deciding that its future lies in bricks and mortar.

It stocks low-ticket items that individually don’t lend themselves to being sold online as the postage costs are likely to be much greater than the actual product. The only way its web sales would ever thrive is if the customer bulk-bought items.

It's a similar rationale to the one Primark adopted in shunning the internet for years, although it has found a happy medium through click and collect.

The strategy shift won’t alter much for The Works apart from a financial hit linked to closing its web services. More than 90% of its sales come from its physical stores anyway, and management will now be free to focus all their attention on this sales channel.

Focus will now shift to other value retailers to see if they can make online services stack up or admit defeat. Card Factory is one step ahead in this regard, having closed its Getting Personal website a year ago and pivoted its main website to focus on personalised products.

Unilever / McCormick

Dan Coatsworth, head of markets at AJ Bell, comments:

Brace yourself for Marmite-flavoured hot sauce after Unilever confirmed bid interest from Cholula maker McCormick for its food brands.

McCormick is no stranger to acquisitions, having made a steady stream of them over the years including the purchase of Reckitt’s food arm which included French’s mustard and Frank’s RedHot sauce. Its M&A track record isn’t entirely perfect though. It tried and failed to buy Mr Kipling maker Premier Foods 10 years ago after the target’s board rejected numerous bids.

There is a real chance that McCormick might not want Marmite longer term. While it is a quintessential brand in the UK, the love it or hate it spread is more of a niche product outside the UK, Australia and South Africa, and it wouldn’t fit naturally in McCormick’s portfolio.

The US suitor is primarily interested in sauces and spices, and for Unilever's portfolio that means Knorr’s seasonings and Hellmann’s mayonnaise. It might not have any trouble offloading Marmite, with the likes of Associated British Foods, Kraft Heinz or Premier Foods being logical buyers.

While there is a natural fit between the bulk of Unilever’s food brands and McCormick, and Unilever seemingly a willing seller, a deal still depends on the right price.

It wouldn’t be out of the question for someone to pay between 1.5 and three times sales for a branded food producer. Unilever generated €12.9 billion revenue in 2025 for its food arm, implying a potential takeout price in the region of €20 to €40 billion.

McCormick paid 7.4 times sales for Reckitt’s food arm in 2017 which was seen to be a highly unusual deal at the time, implying it is willing to pay up for the right brands.