Diageo: Guinness maker looks to put fizz back in its share price

All eyes will turn to Guinness maker Diageo on Tuesday, as the firm provides investors with an update on trading in the first half of the year. 

The FTSE 100 firm, which also makes Smirnoff vodka and Captain Morgan rum, has around £29bn wiped off its market cap value over the past year amid a slowdown in trade focussed particularly in Latin America.

However, shares in the firm rallied up close to five per cent on Friday, after a better than expected financial report from fashion conglomerate LVMH reignited investors’ confidence in the luxury market – with Diageo’s ‘premiumisation’ strategy over recent years potentially ready to once again pay off.

In November last year, the spirits to whiskey supplier downgraded its forecast for the year as a result of cash-strapped Latin American and Caribbean shoppers steering clear of top-shelf liquor. 

China’s ‘anti dumping probe’ into EU Brandy – solidifying trade tensions between the two continents – is also expected to pile on more misery for the firm if the Asian superpower clamps down on imports. 

Russ Mould, investment director at AJ Bell, said  for the full-year analysts are expecting a flat pre-tax profit at £4.7bn  on a stated basis, with operating profit also slightly down. 

He explained: “For the first half only, consensus is looking for a 1.6 percentage point drop in organic operating margin and a five per cent  decrease in organic operating profit, which translates into an underlying earnings per share (or EPS) figure of 107.4p, compared to 100.9p in the first half last year, helped by the lower share count in the wake of the ongoing share buyback.”

A close view on the firm comes less than a year after its long serving chief Ivan Menezes, passed away unexpectedly, with successor Debra Crew forced to step into the role earlier than expected. 

Crew, who was an internal recruit, has been tasked with steering one of the world’s largest alcohol groups amid a challenging time for both consumers and suppliers.  

Diageo has not been helped by being forced to hike prices for consumers, chalking the decision up to rising costs. 

Mould added: “The global drinks giant, best-known for its Johnnie Walker and Talisker scotch whiskies, Captain Morgan rum, Smirnoff vodka and Guinness, will be keen to move on from 2023. 

“Its longstanding and highly respected chief executive, Ivan Menezes, announced his retirement only to pass away before the planned date, and one of the first jobs undertaken by his successor, Debra Crew, was to dish out a profit warning back in November.”

Knightsbridge and Chelsea hail bumper Christmas thanks to swanky shoppers splashing cash

Swanky shops and restaurants around Knightsbridge and Chelsea enjoyed a bumper Christmas, helped by affluent customers splashing the cash on London’s Kings Road. 

Data by Knightsbridge and King’s Road partnerships, business improvement districts, shared with City A.M., showed footfall in December broke levels recorded the year before. 

On the King’s Road domestic spending leapt by 20.5 per cent and on Knightsbridge it grew 59 per cent. 

The average transaction value for food and drink in December was higher than in November in both districts, up 12.5 per cent in Knightsbridge and 35.5 per cent in King’s Road. 

Boxing Day also showed positive footfall growth from 2022 across both regions. 

Steven Medway, chief executive of Knightsbridge and King’s Road Partnerships, said: “Christmas is well-known as an important period for trading, accounting for up to a third of annual sales.  

“Yet, it’s also an important signal for the forthcoming year. Amid ongoing signalling from leading fashion houses and hospitality of a slowing of the pent-up demand for luxury, there has been less commentary on the recipe for resilience.”

It comes as ONS figures showed that UK retail sales plummeted 3.2 per cent in December, well below analyst expectations and the largest monthly fall since January 2021 when coronavirus restrictions pushed down sales.

Diane Wehrle, retail and destinations insight expert, who produced the analysis, said 2024 looks set to be more of a marathon than a sprint for retailers. 

The expert said: “The data reveals that in spite of a challenging trading environment, both districts showed remarkable ability to retain customers and converting them into sales, reflected in both robust sales and increased average transaction values. 

“2024 looks set to be more of a marathon than a sprint owing to the surprise inflationary increase in December, reflected in the drop in UK retail sales in December.”

Wehrle added: “Customers may be more bearish in spending habits until a clear signal emerges on interest and inflation rates, however, the bright side of this is that customers, once attracted, tend to spend money.”

John Lewis points to job cuts as it lowers redundancy pay for staff

John Lewis Partnership could be on track to make further job cuts after it slashed redundancy payout for its staff. 

Workers were reportedly told this week the redundancy pay would be lowered to one week’s pay per year on service, as its current two week policy was higher than what is typically offered. 

In a memo, initially seen by The Telegraph, the struggling high street favourite, which is part-owned by its staff, said its high cost redundancy pay prevented the firm “from moving as quickly” as it wanted to and restricted “ability to invest more in pay.”

John Lewis said it needed to make the policy more affordable to help free up extra cash. 

The outlet said the development reignited speculation internally that there could be further job cuts. 

In March last year, John Lewis warned it would have to cut staff numbers and scrap any bonus after its customers cut back on spending. 

A John Lewis spokesperson told City A.M: “We offer a generous and attractive range of benefits that includes a redundancy package, which will continue to be above the market.

“We’re making changes as a high proportion of our current benefits package is weighted towards Partners after they have left, when we want to better reward those currently working for us. These changes will allow us to invest more in our Partners still within the business.”

The reports come amid a period of losses for the John Lewis Partnership, which also owns supermarket Waitrose.

Frontwoman for the struggling brand, Sharon White will exit the role next February, leaving behind her a troubled balance sheet. 

White, the former boss of Ofcom, enacted a turnaround strategy during the pandemic  to grow the business profits to £400m in five years but this is now expected to be completed in 2027/28.

WH Smith continues to ride planes and trains to growth with captive audience strategy

WH Smith said it was “confident” of another year of significant growth, as it continues to benefit from a resilient demand for travel. 

In an update this morning, the popular newsagent posted an eight per cent rise in group revenues for the 20 week period to January. 

Brits travelling on trains and hitting airports helped hike revenues by 15 per cent when compared to the same period last year. 

The firm said it plans to open 15 more sites across airports and train stations, adding to its 580 sites in these locations. 

However, WH Smith’s high street locations showed signs of struggling with revenues down three per cent. 

Carl Cowling, group chief executive said: “I am pleased with the start to the financial year. Our Travel business is growing strongly across all our divisions and we have seen a notably strong performance in the UK, our largest division, with total revenue up 15 per cent  and like-for-like revenue up 14 per cent 

“During the period, we successfully opened our largest UK Travel store at Birmingham airport – a one-stop-shop for travel essentials – and we have received very positive feedback from both landlord and customers.”

He added: “We continue to make excellent progress in North America, and I am particularly excited by the substantial growth opportunities that exist in this market. We are on track to open over 50 new stores in North America this financial year.”

Superdry: Losses widen, CFO quits and boss admits a ‘difficult’ period

Embattled retailer Superdry posted further losses in its half year update, blaming a challenging retail market and underperformance of its wholesale segment.

In an update on its performance in the first half of this year, the British retailer said revenues were down 23.5 per cent to £219.8m. 

Adjusted loss before tax widened to £25.3m from £13.6m when compared with the same period the year before, and pre-tax profit sat at £3.3m up from a loss of £17.7m. 

Julian Dunkerton, founder and chief executive Officer, said: “This has clearly been a difficult period for Superdry. 

“A challenging consumer retail market, set against a backdrop of macroeconomic uncertainty and some remarkably unseasonal weather conditions have all combined to weaken the financial performance of the Group. 

He added: “These macro and external factors have been further exacerbated by the underperformance of our Wholesale segment. 

“Whilst, to some extent, this was expected due to the decision to exit our US operations and the sale of the brand rights in non-core territories, the segment continues to prove challenging.”

In the last year, Superdry has been trying to keep its head above water and has introduced a number of cost cutting measures. 

Back in October, it signed a joint venture with Reliance Brands Holding UK Ltd (RBUK) for the sale of its intellectual property in South Asia, in its latest bid to boost funds. 

It mirrored an agreement announced by Superdry in March to sell the intellectual property of its Asia Pacific offering to South Korean retail group Cowell Fashion Company for $50m (£40m). 

Separately, this morning the firm also announced the departure of its chief financial officer, Shaun Wills, after nearly three years at the firm. 

Retail veteran Giles David has been appointed Interim on an interim basis and will join the business at the end of the month, and will later join the board in April. 

David has held roles at both McColls and the Casual Dining Group. 

He was embattled chemist’s chief financial officer at the time it went into administration in May 2022, and later reduced by Morrisons. 

Superdry shares were down three per cent when markets opened this morning.

UK consumer confidence hits highest level in two years

UK consumer confidence rose in January and had its highest reading in over two years, as a surprise rise in inflation appeared to not rattle the public. 

The GfK consumer confidence index, which measures consumers’ attitude , picked up to -19 in January, up from -22 the prior month and -24 in November. 

Joe Staton, client strategy director GfK, said: “Consumer confidence has started the year well with all measures up and a headline score of -19, the best since January 2022.

“Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero.”

“This is exciting as it ends 24 consecutive months of negative scores for this measure and this significant change is the best single indicator for how the nation’s households feel about their income and expenditure.

Its major purchase index – which takes the temperature on Brits likeliness to make a big purchase –also rose by three points on December’s reading and by 20 points on last year’s. 

Staton added: “Despite the cost-of-living crisis still impacting many households across the UK, consumers appear to be encouraged by the positive news about falling inflation. 

“On balance, while there is national and global turmoil, the Consumer Confidence Index has started 2024 on a positive note – let’s see if this optimism continues.”

Today’s reading comes despite the annual rate of consumer price inflation (CPI) speeding up for the first time in 10 months in December, rising to four per cent from November’s-two-year low of 3.9 per cent. 

Linda Ellett, UK head of consumer, Retail and Leisure for KPMG, said: “Many people still face the prospect of large jumps in their mortgage when their fixed deal ends this year.  

“And even more face higher costs for the likes of insurance premium renewals, or in-contract increases for mobile and broadband provision.”

“Household spending power is still gradually being eroded and in this environment it is little surprise to see that there is limited appetite for spending dwindling savings on major purchases, except perhaps – for those who can afford to – to temporarily take a break from it all on holiday.”

London rents at record high as market hits ‘affordability ceiling’

The average price of rent in London has hit a record high of £2,631 per month, and is forecast to grow by three per cent more this year, a new report has found, but the market may hit an “affordability ceiling”. 

A study by property portal Rightmove said that this is just four pounds higher than the previous quarter, as the yearly increase of rents in London halves from 12 per cent last quarter, to six per cent now. 

Tim Bannister, director of property science at Rightmove, said: “The trend of rent growth gradually slowing continues, with an improvement in the supply and demand of rental properties having a big contribution to that. 

“We can’t keep seeing double digit rent rises every year as tenant affordability simply cannot keep up, and 2024 is the year we think there will be a much smaller increase in advertised rents of five per cent outside of London, and three per cent in the capital.”

Consistent interest rate hikes made by the Bank of England last year in efforts to reduce inflation have damaged the entire ecosystem of the housing sector. 

Landlords began either selling their properties to dodge rising mortgage payments – limiting the pool of supply – or passing high costs onto their tenants. 

Lodgers also began offering above the asking price to secure a room or flat leading to bidding wars. 

Rightmove said today more tenants are beginning to hit an “affordability ceiling”, further contributing to slowing rent rises.

Figures also show the  number of tenants sending enquiries to letting agents to move is 13 per cent lower than the same period last year. 

At the same time, the number of new rental properties coming onto the market is seven per cent higher than last year.

Rightmove said: “To put this into perspective, the average number of enquiries agents are receiving for every available rental property is currently 11, which while still nearly triple the four at this time in 2019, is down from 14 in 2019.”

Victoria Scholar: Women and youngsters the biggest winners amongst retail traders

Exclusive interactive investor research: Youngest investors biggest winners at the tail end of the year as average portfolio weighting to cash wanes.

We’ve just launched the latest interactive investor Private Investor Performance Index, with data to Q4 2023. This research is essentially a deep-dive into interactive investor (ii) customers’ investment behaviour and any broader trends. And with data now going back four years, it provides a truly unique insight into how private investors have been fairing.

One of the key takeaways from the research is that even when markets are choppy, it is still worth keeping your money invested. Despite having to navigate through some dizzying twists and turns in the investment landscape in 2023, our Private Investor Performance Index shows that the typical interactive investor customer portfolio generated inflation-beating returns that also trumped returns on cash savings.

How have investors been behaving against a backdrop of heightened volatility and uncertainty around interest rates? Our data shows that investors have broadly stuck to their knitting; maintaining well-diversified portfolios, with fingers dipped in different investment pies across the globe.

In what was a volatile year for investments, stoked by high interest rates, elevated (yet slowing) inflation, and geopolitical tensions, among other factors, the youngest investors on interactive investor enjoyed the highest returns at the tail end of 2023, with 18-24-year-olds leading the pack, up 6.4% in Q4 2023 alone.

It was also a positive story for female investors, as interactive investor’s female customers outperformed men over the full four-year time frame (since January 2020, up 14.6 per cent versus 13.5 per cent for men in median terms.) Men and women investing through ii tend to invest along similar lines, as our data shows, but women have a slightly higher weighting to investment trusts.

Our Private Investor Performance Index is published quarterly, and there is plenty of in-depth analysis to get your teeth into. We include portfolio breakdowns in terms of asset classes, (as well as across regions, age, gender), top holdings across various ii customers, and plenty more. The full research can be found on interactive investor’s website, here.

Never a borrower be

UK public sector net borrowing excluding banks hit £7.8 billion, the lowest December borrowing figure since 2019 and around half the same figure from the previous year. Central government debt interest payable also fell significantly, thanks to a reduction in inflation, specifically the Retail Price Index (RPI), which impacts index-linked gilts. The reduction in December’s borrowing is a win for the government, providing some fiscal wiggle room for the Conservatives to potentially cut taxes in this crucial election year. The fall in inflation helps reduce the government’s debt interest costs which jumped on the back of rising prices and interest rates.

Mince pies and much more deliver Premier results

Crypto conundrum

Bitcoin shed 16 per cent of its value in just two weeks, briefly dipping below $40k for the first time this year. There was so much excitement ahead of the US regulator, the SEC’s approval of bitcoin ETFs. But its performance since the green light was given has been extremely disappointing for crypto investors. The weakness so far in 2024 comes after an impressive performance last year when bitcoin surged over 150 per cent, contributing around $530 billion to its market capitalisation. Despite last year’s surge, bitcoin is still a long way off its all-time high in November 2021 when its value surpassed $65k.

Victoria Scholar is head of investment at interactive investor

Mark Kleinman: Post Office needs new leaders to deliver real change

Mark Kleinman is Sky News’ City Editor and writes a weekly column for City A.M. This week, he tackles the Post Office, succession at Lloyd’s and the six-days-a-week Royal Mail obligation

Check out these words from Nick Read, chief executive of the Post Office, uttered in April 2021: “I intend to work with government on the various means by which we could deliver on a longer-term aspiration to facilitate profit-sharing between Post Office Limited and postmasters,” he said, hinting that such an arrangement might be in place within four years.

Fast-forward to today, and those words look like a delusional pipe-dream. Not only is the UK’s largest retail network in a financial state which means it is as reliant as ever on its state owner to finance its continued operation, but its leadership team’s promises of reform have been fundamentally discredited.

The litany of fraudulent behaviour uncovered by the public inquiry into the Horizon IT scandal, along with the glare of public attention galvanised by the ITV drama Mr Bates vs the Post Office, have reinforced an uncomfortable truth: the lack of intellectual rigour from those in positions of influence which could have exposed this grotesque cover-up much sooner has persisted until the present day.

The lack of intellectual rigour from those in positions of influence which could have exposed this grotesque cover-up much sooner has persisted until the present day.

All the procrastination, non-cooperation and obfuscation by those responsible for submitting evidence to the inquiry could have been dealt with far more quickly, if there had been firmer and more decisive leadership. The fiasco last year over the wrongful payment of a bonus worth tens of thousands of pounds to Read, and his delay in repaying it, indicates the extent of the rotten culture which continues to exist at the Post Office.

It emerged last week that Ben Tidswell, a former corporate lawyer who by all accounts is held in high regard in Whitehall, would step down as the Post Office’s senior independent director after just one three-year term on the board. The reasons for that are unclear but I understand that his departure was his decision alone.

I suspect that other changes in the Post Office’s boardroom are imminent, too, and they need to take place at the very top if the government really does want to orchestrate genuine change.

Sedwill is dark horse for Lloyd’s chair

From Ten Downing Street to the chairman’s office at One Lime Street? There seems a decent chance of that outcome as Lloyd’s of London embarks on the search for a successor to Bruce Carnegie-Brown, whose term is due to expire next year.

Lloyd’s has yet to hire a headhunter to oversee the process (although that is likely to change in the coming weeks), but it is telling that the Council director who will lead it is Fiona Luck, the insurance industry veteran. That’s because the obvious person to spearhead the hunt for Carnegie-Brown’s successor would have been Lord Sedwill, who was appointed senior independent deputy chairman in 2021.

The decision of Lord Sedwill, who served as cabinet secretary under Theresa May and Boris Johnson, to recuse himself from leading it suggests that he has thrown his hat into the ring himself.

Since leaving Whitehall, he has also joined the board of BAE Systems, the defence contractor, and become a non-executive director of Rothschild & Co; chairing Lloyd’s would be an obvious further step into the corporate establishment.

One source tells me that Lord Sedwill has yet to make up his mind about becoming a candidate for the job. During a comparatively benign period for Lloyd’s, his political credentials would nevertheless be useful.

It has just agreed a deal with Chinese landlord Ping An to remain at its famous headquarters until the 2040s, and has dealt with one of the more sensitive chapters in its history by pledging to pay $50m to development projects by way of reparations for its involvement in the transatlantic slave trade.

Carnegie-Brown’s has proved to be a steady hand on the tiller, with half-year profits last September of £3.9bn. But with climate risk and global volatility spiking, alongside the ‘black swan’ events which have a habit of disrupting insurers’ best-laid plans, finding a replacement with a combination of political and business acumen would serve it well for the rest of this decade.

Ofcom’s Royal Mail reforms bear the stamp of irony

I can’t have been the only person who noted the irony in the timing of yesterday’s Ofcom consultation paper on reforming Royal Mail’s universal service obligation (USO) – a document that could ultimately be regarded as one of the most important in the 507-year history of Britain’s postal service.

Part of London-listed International Distributions Services, Royal Mail is, in financial terms, on its knees. Much of the culpability for that lies with the company itself – a botched approach to industrial relations, poor operating performance and an absence of leadership continuity have all cost it over the last decade.

Now for the ironic part. Last September, the regulator announced that it would publish proposals for an overhaul of the financially burdensome USO regime by the end of the year. 

Instead, it came 24 days into 2024. Many Royal Mail customers will, of course, be painfully familiar with the concept of delayed deliveries. Indeed, Ofcom itself imposed a £5.6m penalty on Royal Mail last November for failing to hit both first-class and second-class post targets.

That penalty was due to be paid into the Treasury’s coffers by January 13. Indeed, it would surprise nobody if the money had turned up late.

Famed business newspaper to ditch pink newsprint

One of Europe’s leading business newspapers is set to ditch pink print – with the additional cost of printing on the funny-coloured pages no longer economically sensible.

Norwegian business paper Dagens Næringsliv, which opted for the pink newsprint back in 1989, has said that it can no longer afford the additional costs.

“Paper editions are still important to DN,” the paper’s editor in chief told Norwegian media outlet Medier24.

“But print must be profitable. Now the cost of maintaining pink paper on weekdays is too great, and white paper is significantly less expensive. That is why we have decided to make this move now,” Janne Johannessen continued.

The weekend edition of the paper switched from pink to white a few years ago.