Germany’s DAX index led the charge as European markets put their front foot forward.
The DAX rose 0.8%, propelled by Siemens Energy which was the talk of the town after an upbeat analyst briefing.
Positive sentiment didn’t extend to shipping giant Maersk despite raised guidance. The shares initially jumped at the market open, but the gains quickly disappeared. The company has seen elevated demand to transport goods from Asia as US companies stockpile inventory from China ahead of new US tariffs. That’s pushed up freight shipping rates which bodes well for Maersk’s earnings.
In the UK, the FTSE 100 rose 0.4% amid strength in basic materials, healthcare, and real estate stocks.
Investors love a share buyback, so an upgraded programme is music to the ears of IWG shareholders. The Regus serviced office provider has added another $50 million buyback to an existing $100 million scheme.
Sainsbury's
Sainsbury’s is finding life a little harder as first quarter sales growth slows. It reported 2.1% like-for-like sales growth versus 4.7% in last year’s comparative period.
It’s not disastrous and the grocer is still striking a chord with both cost-conscious individuals and shoppers happy to spend a bit more on fancy items. Online grocery sales were notably strong, and Sainsbury’s continues to find ways to improve the in-store shopping experience.
Sainsbury’s is rolling out facial recognition technology in the fight against crime. Supermarkets and other retailers are facing a wave of shoplifting, costing them big money in lost goods. While social media videos show security guards either failing to stop shoplifters or ignoring them completely, it’s clear that shopkeepers cannot let the situation get out of hand. Sainsbury’s says a trial of facial recognition technology resulted in over 90% of identified offenders not returning.
The only weak point in Sainsbury’s latest update is the non-food side of the business where general merchandise sales were poor and Argos sales were sluggish. Sainsbury’s might argue that situation isn’t alarming given how more shop space is being given to food.
Argos shifted a load of fans to cool people down during the May heatwave, and no doubt did the same in recent days as temperatures soared. Football fans also used the World Cup as an excuse to buy a new TV, no doubt justifying the purchase on the need to see the matches on a bigger screen and in better resolution. Take those sales drivers away and Argos might have been in the doldrums.
A marketplace service will launch on Argos later in the year. That will extend the choice to customers but won’t necessarily be the solution to Sainsbury’s problems. The strategy could easily backfire if shoppers get frustrated that certain items are only available from third party suppliers and not stocked in Argos concession stands inside Sainsbury’s stores.
If someone wanted a massive range of items and is happy to buy online and have it delivered to their home, why would they choose Argos over Amazon? It’s hard to believe that Argos will suddenly prosper just because there is a broader range of products. After all, Argos already has a comprehensive offering.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
