LONDON MARKET MIDDAY: Burberry Leads Gainers As Stocks Reverse Losses

LONDON (Alliance News) - Mild morning losses turned into tepid gains by midday Wednesday for London stock indices, with shares in Burberry Group rising strongly after the luxury firm reported growth in revenue in the first quarter of its financial year, benefiting from the weak pound, and upped its guidance for full-year profit.

Fashion house Burberry said retail revenue in the three months ended June 30 grew by 4% year-on-year to GBP423 million, but within this, comparable sales declined by 3% in what Burberry described as a "challenging external environment".

Burberry said all three global regions of Asia, the UK and US experienced a low single-digit percentage comparable sales decline, due to persisting underlying cost-inflation pressures. However, Liberum said the decline in comparable sales was not as bad as the consensus forecast for a 5% fall.

In the first half ending September 30, Burberry now expects wholesale revenue at constant exchange rates to fall by over 10% year-on-year, although full-year reported adjusted retail and wholesale profit should benefit by about GBP90 million if exchange rates remain as they are now.

The stock was up 5.7%, the best performer in the FTSE 100.

The blue-chip index was up 0.2%, or 12.41 points, at 6,693.10. The mid-cap FTSE 250 was up 0.2% at 16,832.46. The AIM All-Share was up 0.5% at 724.61.

In mainland Europe, the CAC 40 in Paris was up 0.4% and the DAX 30 in Frankfurt up 0.1%.

Before the open on Wall Street, futures pointed the Dow Jones Industrial Average slightly higher, the S&P 500 index up 0.1% and the Nasdaq 100 up 0.2%.

Having rallied for the past few trading sessions, housebuilders led the fallers in the FTSE 100. Barratt Developments said it is preparing for the greater uncertainty following the UK's referendum on European Union membership but expects profit in its recently ended financial year to be significantly higher.

Barratt said it expects to post a pretax profit of GBP680.0 million for the year ended June 30, a 20% increase from the GBP565.5 million reported a year earlier, after its total completions for the year rose 5.3% to 17,319 from 16,447 and the average selling price of these rose 10.6% to GBP260,000 from GBP235,000.

The company noted that forward sales, including joint ventures, fell slightly, by 0.5% to GBP1.76 billion from GBP1.77 billion, and said it was "mindful" of the greater uncertainty facing the UK economy following the EU referendum.

Analysts from Shore Capital and Liberum expect Barratt to be hit more than other large housebuilders by the tougher conditions in the post-Brexit housing market due to its thinner margins.

Barratt was one of the worst performers in the FTSE 100, down 1.5%. Peers Berkeley Group, down 2.8%, Persimmon, down 1.1%, and Taylor Wimpey, down 1.0%, also were all amongst the biggest fallers.

Discount retailer Poundland Group said it has reached an agreement with South African furniture retailer Steinhoff International Holdings for Steinhoff to buy Poundland.

Under the terms of the offer, Poundland shareholders will receive 222 pence in cash for each Poundland share, comprising 220 pence in cash per share and Poundland's final dividend of 2p per share for its financial year ended March 27.

This values Poundland at approximately GBP597 million, and represents a premium of 40% to Poundland's 158.25p closing price on June 13, which was the last business day before Steinhoff first bought Poundland shares, and a premium of 13% to Poundland's 196p closing price on Tuesday. On Wednesday, the stock was up 13% at 220.50p and was the best performer in the FTSE SmallCap index.

JD Wetherspoon traded up 2.2% after the Brexit-supporting pub chain reported growth in sales in the 11 weeks to July 10 and in the 50 weeks to the same date, as it prepares to close its current financial year.

Wetherspoons said total sales in the 11 weeks grew by 3.8% year-on-year, while rising by 5.5% in the 50 weeks. Like-for-like sales increased by 4% in the 11 weeks and by 3.4% in the 50 weeks. Full-year operating margin before exceptional items and before a GBP3.8 million property gain is expected to be around 6.8%, compared with 7.4% last year.

Wetherspoon has opened 13 new pubs in the financial year, sold 29 and closed 11. It expects to have opened 16 new pubs by the end of the year, booking around GBP13 million in exceptional, non-cash losses due to the pub disposals and closures.

In economic news, China's exports remained weak in June on subdued global demand and given the uncertainty over 'Brexit', which weighs on orders from China's major export destinations, the near-term prospects are not bright.

In dollar terms, exports fell 4.8% on a yearly basis in June, the General Administration of Customs reported Wednesday. Nonetheless, it was slower than the expected decrease of 5%. At the same time, imports registered an 8.4% decrease, which was bigger than the 6.2% drop forecast by economists.

Consequently, the trade surplus fell to USD48.11 billion from USD49.98 billion in May. Economists had expected the surplus to decrease to USD45.65 billion.

Still ahead in the economic calendar, the US Energy Information Administration's crude oil stocks are at 1530 BST, and the Beige book on the US economic situation is at 1900 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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