Member Article

Greggs down as Burberry and Direct Line surge

It was a busy day for corporate updates in the UK. Starting with the positives, Burberry topped the FTSE 100 leader board following a well received first half update. The group showed decent growth over the corresponding period in 2011, thanks in part to an improvement in trading in September. It follows a profit warning from the group last month in which the group suggested full year profits would be toward the lower end of management expectations, a release that caused reverberations through the luxury goods sector. The clarity/reassurance added today led to a bounce in the stock that has fallen nearly 30% since early September, so today’s 13.3% gain to 1136p represented only a partial recovery. It was also the first day of trading for Direct Line, the insurance arm of RBS, with shares listed at 175p (within the original range of 160p – 195p). RBS sold 30% of the business in the deal, and must divest its remaining holding before 2015. Shares in the car and home insurer, trading under ticker symbol DLG, ended their first day 7.6% higher at 188p. Greggs shares reacted negatively to the bakery’s third quarter update, and despite showing an x% increase in sales at the top line, like-for-like sales (i.e. excluding the opening of new stores) fell x% on the period. Whilst Greggs is making expanding strategically into motorway service stations and through the sale of frozen goods in Iceland (the latter performing particularly strongly), the group is still very much exposed to footfall on the high street. Shares closed down 4.1% to 495.5p. Markets began the day broadly higher, with a successful sale of Italian three year debt sufficient to offset concerns over Spain, whose credit rating was downgraded to BBB- by S&P, only one notch above junk status. Employment data from the US provided an excuse for further buying, as initial jobless claims fell 30,000 to 339,000 in the week ending the 6th October, against forecasts of 370,000. More defensive sectors were located at the bottom of a FTSE 100 index that finished the day 0.9% higher at 5829.

This was posted in Bdaily's Members' News section by James .