LONDON MARKET OPEN: JD Sports falls after Nike cuts revenue forecast

(Alliance News) - Stock prices in London opened lower on Friday amid growing worries over the UK's economic prospects, while JD Sports fell to the bottom of the FTSE 100 after top brand Nike warned that supply issues will hurt annual revenue.

The FTSE 100 index was down 22.46 points, or 0.3%, at 7,055.89 early Friday. The mid-cap FTSE 250 index was down 94.85 points, or 0.4%, at 23,735.85. The AIM All-Share index was flat at 1,271.98.

The Cboe UK 100 index was down 0.3% at 701.40. The Cboe 250 was down 0.3%, at 21,524.30. The Cboe Small Companies was 0.1% lower at 15,592.80.

In mainland Europe, the CAC 40 stock index in Paris was down 0.5% and the DAX 40 index in Frankfurt was down 0.7%.

Consumer confidence in the UK has plunged amid increasing anxiety about the rising cost of living, a long-running survey suggested.

GfK's Consumer Confidence Barometer fell by five points to minus 13 in September, a drop not seen since October last year. All measures of the survey, including confidence in the general economic situation and personal finances, were down in comparison to last month.

"When consumer confidence drops, shoppers tend to spend less, and this dampens the overall economic prospects for the UK. This really is an unwelcome picture going into 2022 and beyond," said GfK's Joe Staton.

The index also recorded a three-point drop to minus six in the major purchase index, an indicator of consumer confidence in buying big ticket items, in worrying news for hard-pressed retailers looking to build sales as they go into the key holiday period.

"Rising inflation, cuts to government support schemes, the power crisis along with the potential lack of products available are clearly a worry within the UK and likely to be causing big challenges for the Conservative party, especially with its upcoming annual conference. We expect these concerns to remain headwinds to the GfK consumer index recovery, throughout the upcoming months," said analysts at Shore Capital.

In the FTSE 100, AstraZeneca was the best performer, up 3.3%, after the drugmaker announced positive results from the PROpel phase three trial of Lynparza.

The Anglo-Swedish firm said that the PROpel phase three trial for Lynparza achieved its primary endpoint of radiographic progression-free survival in men with metastatic castration-resistant prostate cancer, compared to standard-of-care abiraterone.

Interim analysis by the Independent Data Monitoring Committee concluded that the trial met the primary endpoint in men which had not received treatment in the first-line setting including new hormonal agents or chemotherapy.

At the other end of the large-caps, JD Sports Fashion was the worst performer, down 2.7%, with the sportswear retailer suffering a negative read-across from Nike.

The US athletic apparel maker late Thursday reopened first quarter results which missed consensus estimates. The stock fell 3.9% in after-hours trade in New York.

In the period ended August 31, Nike's revenue climbed 16% annually to USD12.25 billion from USD10.59 billion a year earlier. Quarter-on-quarter, revenue declined 0.8%. The first-quarter top line came in below CNN-cited consensus of USD12.5 billion.

On the subsequent conference call, Nike said sales may fall as factory closures in Vietnam prevent the company from keeping up with consumer demand.

"Several of our factory partners in Vietnam and Indonesia were required to abruptly cease operations in the first quarter. As of today, Indonesia is now fully operational, but in Vietnam, nearly all footwear factories remain closed by government mandate. Our experience with COVID-related factory closures suggest that re-opening and ramping back to full production scale takes time," Nike said.

As such, Nike said full-year revenue will be in the mid-single-digits rather than a low double-digit percentage rate it earlier targeted.

"The problem for Nike is that these problems are not easy to fix and there is no telling when the situation will improve. The CEO of Covid vaccine maker Moderna predicted yesterday that it would take another year for the pandemic to disappear, meaning the current supply bottleneck could last for months," said eToro analyst Mark Crouch.

German sportswear brand Adidas was down 3.3% in Frankfurt.

In the FTSE 250, Mitie Group was up 3.0% after the outsourcer raised its profit guidance due to a series of Covid-linked contract awards.

Mitie said it now expects to deliver operating profit of between GBP145 million and GBP155 million in its financial year ending March 31, 2022. Operating profit before items was GBP63.4 million in financial 2021 and GBP86.1 million in financial 2020.

LondonMetric Property was up 2.0% after Citigroup raised the distribution and long income property investor to Buy from Hold.

The Japanese Nikkei 225 index closed up 2.1% on Friday, reopening after being closed for a holiday on Thursday. In China, the Shanghai Composite closed down 0.8%, while the Hang Seng index in Hong Kong was down 0.1%. The S&P/ASX 200 in Sydney ended down 0.4%.

The pound was quoted at USD.3705 early Friday, down from USD1.3736 at the London equity market close on Thursday.

The euro was priced at USD1.1732, little changed from USD1.1735. Against the Japanese yen, the dollar was trading at JPY110.44, up from JPY110.18.

Brent was quoted at USD77.61 a barrel Friday morning, up sharply from USD75.94 late Thursday. Gold stood at USD1,755.47 an ounce, higher against USD1,748.28.

Friday's economic calendar has Ifo's business climate index for Germany at 0900 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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