Apple shares drop on profit warning
Apple shares (NASDAQ: AAPL) fell more than 7% after the tech giant cut its sales forecasts on Wednesday.
Whilst the festive season is usually Apple’s greatest trading season, revenue totalled $84 billion – a 5% fall from the same period last year.
CEO Tim Cook released a letter to investors, where he blamed the firm’s issues on China.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China.”
“China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years,” he wrote.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp,” Cook added.
“We believe that our business in China has a bright future.”
The fall in shares wiped $55 billion (£44 billion) from the group’s value.
Apple’s profit warning is the first in 15 years and has led to worries that consumers are less attracted to buying the latest models of phones.
James Cordwell, an analyst at Atlantic Equities, said: “The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise.”
Shares in Apple have fallen over 28% since November. Shares in the group (NASDAQ: AAPL) are currently trading -7.54% in after-hours trading at 157.92 (1003GMT).
Next pre-Christmas sales increase, full-year profit reduced
Next released a trading statement on Thursday, reporting strong sales in the pre-Christmas shopping period. Despite this, it has lowered its full-year profit by 0.6%.
Full price sales for the Christmas trading period, which began on 28 October and ended 29 December, have been in line with the guidance released in September.
Total full price sales were up 1.5% compared to the same period in 2017. Online sales, including interest income, were 2.2% above expectations. This growth was not reflected in its retail sales which remained 1.7% below expectations.
For the year ahead, Next expects its full price sales to grow 3.2%, which remains in line with its September guidance. Despite this, the fashion retailer did slightly reduce the full-year profit that it previously outlined. It is now expected to come in at 0.6% below the level previously outlined, a reduction to £723 million.
Moreover, the retailer expects earnings per share of 435.2p. This is a 4.4% increase compared to the previous year.
In the trading update, Next outlined that all forecasts come with a strong level of uncertainty as a result of Brexit.
“Any sales forecast made in January comes with a high degree of uncertainty. This year uncertainty around the performance of the UK economy after Brexit makes forecasting particularly difficult. We have not factored into our sales estimates the potential benefits of a smooth transition or the downsides of a disorderly Brexit,” Next said. At the end of 2018, PwC reported that the UK high street was facing the toughest trading conditions in five years. Indeed, the poor footfall numbers of 2018’s Boxing Day sales reflect a broader sector-wide crisis that hit retailers last year. In addition to Brexit uncertainty, we took a look at some of the factors fuelling the UK retail crisis. These include smarter shopping habits and changing UK weather patterns that are impacting clothing lines. At 09:15 GMT today, shares in Next plc (LON:NXT) were trading at +3.71%.Ryanair grows December traffic by 12%
Ryanair released its traffic statistics on Thursday. It reported a 12% growth in its December traffic to 10.3 million customers.
The low-cost airline said that it operated over 57,000 scheduled flights in December, with more than 81% landing on time.
December’s 10.3 million flyers is a 12% growth compared to December 2017.
The figures also included 0.3 million customers from Austrian low-cost airline Laudamotion. Ryanair acquired Laudamotion last year. Indeed, in March last year, the low-cost airline reported that it had acquired a 75% stake of the airline owned by Niki Lauda. This was its first acquisition in 15 years. The company said it would invest €100 million in Austria’s Laudamotion, which it would assist in developing as another low-cost airline.
Ryanair also reported a load factor of 95%.
Last year saw some chaotic changes for the airline’s passengers as confusion was caused over its second baggage rule change in 2018. The airline dramatically reduced the free luggage passengers could take on board. Under the previous rule, passengers were permitted one large and one small cabin bag to take on board with them through security. This rule changed to a baggage allowance of a ‘medium’ sized bag. Passengers were given, however, some leeway of 25% bigger than the new maximum dimensions. In addition, the airline decided to not alter its plans to close its base in the Netherlands. This decision was taken in spite of a court order blocking the company from relocating crew against their will. Since August, two staged walkouts took place in Portugal, Germany, Spain, Belgium and the Netherlands. It also announced the anticipated closure of two crew bases in Germany. In July, the airline gave a 90-day notice to over 300 pilots and cabin crew members in Dublin. It also revealed the anticipated closure of two crew basis in Germany. At 08:40 GMT, shares in Ryanair Holdings plc (LON:RYA) were trading at +0.9%.Tesla shares tumble on poor quarterly results
Shares in Tesla fell 9% on Wednesday after revealing a poor quarterly performance.
The electric carmaker said that it plans to cut the price of vehicles in the US by $2,000 and that the group missed quarterly expectations.
Garrett Nelson, an analyst from CFRA, said: “Tesla shares tend to a have a lot more noise and volatility than most, but we think investors who are willing to take a longer-term view of the story will be rewarded handsomely and continue to believe Tesla is on track to post one of the market’s most robust year-over-year earnings increases in 2019.”
The group tripled deliveries of its electric vehicles to 90,700 in the fourth quarter, up from 29,870 a year earlier.
Shares in the group have had a volatile year, helped along by the controversial nature of the group’s boss, Elon Musk.
Earlier this year Musk was fined by the Securities and Exchange Commission (SEC).
Shares in the group (NASDAQ: TSLA) are currently trading +7.55% (1632GMT).
John Lewis sales rise 11% on Christmas Eve
The John Lewis Partnership has reported a rise in sales on Christmas eve – an 11% growth in sales compared to the year previous.
Sales at the partnership, which includes both John Lewis and Waitrose stores, saw sales rise not only on Chrismas Eve but also on Boxing day.
Barry Matheson, who is the group’s head of shop trade for Scotland and the north of England, said the stores had “very strong sales on Christmas Eve and a confident start to clearance sales both online and in shops”.
Beauty and leisure products at the department store rose by 25%, whilst a rise in technology products pushed sales up 3.1%. Fashion sales surged by 11%.
Waitrose provided a particular boost to sales, with a 19.2% rise on the same week a year ago.
“As always at this time of year, our sales figures are heavily distorted by the fall of Christmas and New Year. Both these weekly performances were in line with expectations,” said a spokesperson for the group.
Nicholas Carroll, who is a senior retail analyst at research group Mintel, said: “There has obviously been a big distortion by the way the last week has included Christmas Eve, and we will get a better picture in few days time when we get sales for the whole of the six week Christmas trading period.”
“Even so at a time when retailing is meant to be on its knees, the John Lewis figures that we can see look fairly good and they imply an increase in sales of about 4% over the two week period.”
Retailers including Marks & Spencer (LON: MKS), Debenhams (LON: DEB) and Tesco (LON: TSCO) will update investors next week.
Next will release an update on Thursday.
Sales at in the run-up to Christmas varied amongst retailers. Online fashion retailer Asos issued a profit warning.
Rise in rail fares met by protests across UK
Rail fares increased by 3.1% in England and Wales on Wednesday, leading to protests across stations.
The rise in rail prices is considerably more than the 2.6% rise in the average wage in 2018, increasing the cost of rail fares by hundreds of pounds to many commuters.
Despite the high number of strike action, cancellations and delayed trains the increase in fares has been defended by Transport Secretary Chris Grayling and the rail industry who have said that 98p on every pound spent on tickets is reinvested back into the rail.
The shadow transport secretary, Andy McDonald, has not defended the increase to price fares and said: “Today’s rail fare increases are an affront to everyone who has had to endure years of chaos on Britain’s railways.”
“Falling standards and rising fares are a national disgrace. The government must now step in to freeze fares on the worst-performing routes,” he added.
Prices in London will be frozen, thanks to London Mayor Sadiq Khan.
Anthony Smith, who is the chief executive of the independent watchdog TransportFocus, said: “Passengers now pour over £10 billion a year into the railway alongside significant government investment, so the rail industry cannot be short of funding. When will this translate into a more reliable services that are better value for money?”
Frances O’Grady, the TUC general secretary, said: “The most reliable thing about our railways is the cash that goes to private shareholders each year. But with the most expensive fares in Europe, that can’t be right. It’s rewarding failure and taking money away that should be invested in better services.”
“It’s time to take the railways back into public hands. Every penny from every fare should go back into the railways. The number one priority should be running a world-class railway service, not private profit.”
Footwear brand Mahabis falls into administration
The footwear brand Mahabis has entered administration.
The retail group, which was founded in 2014, called in administrators just days after Christmas.
“We are very sorry to report that Mahabis Limited entered administration late on the 27th December 2018,” said Mahabis in a statement.
“We have, for the moment, ceased trading as the administrators take over the business … We are all desperately disappointed at this outcome. Please bear with us as we do our best to work through the current circumstances,” the statement added.
The group had sold almost one million pairs of slippers in over 100 countries.
Whilst it is not yet clear what caused the downfall of the retailer, Mahabis was worth around £75 million – £100 million.
Customers who want to return recently bought footwear from Mahabis have been told not to expect a full refund.
“It is very likely that if you return goods you will not receive a full refund and any refund will take many months,” said the group. “We would recommend therefore that you consider carefully whether or not to actually return goods.”
Mahabis, where shoes cost around £70, targetted millennials through pop-up ads and email discount offers. The footwear company is thought to owe creditors £2.6 million to creditors in the 12 months to June 2017.
Staff at the firm worked a four-day week. The Mahabis boss, Ankur Shah, published a manifesto which encouraged ‘down-time’ for employees.
The brand is the latest to be hit by the UK’s difficult trading environment. Other brands that have collapsed over the past year include Toys R Us and Poundworld.
Mortgage approvals in 2018 hit 10-year high
A new analysis from the Yorkshire Building Society has revealed that first-time buyer mortgage approvals hit a record high in 2018.
Despite higher UK house prices, mortgage approvals hit a 10-year high allowing an increase of 362,800 first-time buyers to take out mortgages in 2018 compared to 2017.
The year 2018 saw 367,038 first-time buyers take out mortgages. This is compared to the 193,300 taken out following the financial crisis in 2008.
“Property prices have grown at a faster rate than wages over the past 12 years, which has created difficulties for first-time buyers,” said Nitesh Patel, a Yorkshire Building Society strategic economist.
“Various factors have helped to alleviate this challenging environment, although the market is still pretty tough for those wanting to become homeowners.”
“However, the figures indicate that government initiatives such as stamp duty relief, Help to Buy equity loans and Help to Buy ISAs may have made an impact. Over the past three or four years, we’ve also seen more mortgage lenders offering 96 per cent loan-to-value mortgages, as well as strong competition driving mortgage rates down,” he added.
“This combination of factors has made buying a home more accessible in recent years. But getting onto the housing ladder is still not an easy step for many young people, as demonstrated by the increasing numbers who have received help from the bank of Mum and Dad.”
“Despite these challenges, the first-time buyer market has bounced back following the financial crisis to outperform other sectors, such as the home moving and buy-to-let markets.”
“Buying your first home remains tough for many by it’s encouraging to see first-time buyer levels at a ten-year high and climbing.”
FTSE 100 starts 2019 in the red, down 1.6%
For the first day of trading in 2019, the FTSE 100 has opened in the red.
Wednesday morning saw the blue-chip stock index fell over 100 points, or 1.6%, to 6,620.71.
The bad start to the year follows the end to 2018, where the FTSE 100 tumbled over 12.5%, wiping over £240 billion off the value of companies listed on the London Stock Exchange.
Markets in Europe and Asia were both hit at the start of the year. Eurostoxx and stocks in Shanghai are down by over 1%, while Hong Kong’s Hang Seng fell by almost 3%.
“Global stock markets seem shaky on the first trading day of the year and still under the influence of the sell-off which we experienced in 2018,” said Naeem Aslam, who is the chief market analyst at Think Markets.
“Investors are clearly concerned about the growth in 2019 and the lack of confidence is keeping them on the sidelines or they are feeling safer by parking their capital in risk-off assets,” he added.
“The Chinese Caixin manufacturing number released today made investors more concerned about this as the number dipped below the critical point which differentiates the difference between contraction and expansion.”
“On the back of this number, investors followed one particular theme which spread from Hong Kong to Sydney- press the sell button only. Basically, for traders as long as the issues around the trade war between the US and China aren’t resolved, they cannot think of a situation which can promote growth.”
The tensions between the US and China are making a dent to global markets.
Christina Parthenidou, an investment analyst at XM, said: “With business conditions in China deteriorating and clarity missing over how Washington and Beijing will finally solve their trade dispute, despite both sides showing willingness to do so, some additional stimulus might be needed later in the year to prevent further economic weakness.”
Among the biggest fallers of the FTSE 100 on Wednesday are mining companies. BHP (LON: BHP) is currently trading down 4.01% and Glencore (LON: GLEN) shares are trading down 4.35% (1022GMT).
HMV falls into administration for a second time
Following tough trading over the Christmas period, HMV has fallen into administration.
The retailer is the latest to feel the bite of the difficult trading conditions and collapse, risking over 2,000 jobs.
KPMG has been appointed as the group’s administrators, who said they will keep all 125 stores trading whilst a buyer is found.
“Over the coming weeks, we will endeavour to continue to operate all stores as a going concern while we assess options for the business, including a possible sale,” said Will Wright, from KPMG.
“Customers with gift cards are advised that the cards will be honoured as usual, while the business continues to trade,” he added.
This is the second time that HMV has fallen into administration. The retailer last collapsed in 2013, where the group faced a backlash over gift cards that had become worthless overnight. It was soon bought by Hilco Capital in a £50 million deal.
Paul McGowan, who is the executive chairman of HMV and its owner Hilco Capital, said: “Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months on top of such a dramatic change in consumer behaviour in the entertainment market.”
“However, during the key Christmas trading period the market for DVD fell by over 30% compared to the previous year and, whilst HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” he added.
The music retailer is among other big names to also fall into administration over the course of 2018. Retailers such as Toys R Us, Poundworld and Maplin have collapsed.
Many retailers, including Marks & Spencer (LON: MKS) and Carpetright (LON: CPR), have also suffered and closed stores using CVAs and issued profit warnings.