Superdry shares delivered more disappointment for investors on Friday as the company announced falling sales in a bleak half-year report.

Superdry’s sales crumbled by 23.5% in the half-year period to the end of October 2023. Statutory profit before tax only swung from £17m loss to a £3m profit due to the disposal intellectual property.

The underlying message from the report is the group’s products aren’t as attractive as they once were, and falling sales are putting pressure on finances.

Just as Superdry’s products are falling out of fashion, the company’s shares are no longer all the rage and fell 3% on Friday.

There may be some solace for investors as far as there is a sector-wide slowdown in mid-range fashion, but Superdry’s problems are not new and certainly didn’t start due to a slowdown in consumer spending.

“The latest instalment of the Superdry saga isn’t a pretty one. Half year revenue fell over 23%, with the group laying the blame on an unseasonably warm December, highly competitive industry leading to discounts, as well as broader consumer weakness,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“The area of the market that Superdry is targeting is a particularly difficult point on the spectrum. It’s not high end enough to be considered luxury, and it’s not a bargain option either. There have been well-documented slip ups operationally too, including poorly managed inventory. The net effect is one of widening losses and a worrying debt pile.

“The group’s substantial physical footprint adds pressure for sales volumes to improve sooner rather than later. Superdry is famous for its outerwear and warmer clothes, so the recent cold snap has added a bit of warmth into numbers, but not enough to thaw remaining challenges.”

The FTSE 100 was trading marginally lower on Thursday after the ECB signalled they were not in a rush to cut interest rates, and markets must wait for further evidence that high inflation levels were firmly behind us.

The ECB said rates must remain at elevated levels for an extended period to maintain the fight against inflation as it held interest rates at 4.5%. In ECB President Lagarde’s press conference, she said the interest cut debate was premature. This was not the news equity investors wanted to hear.

There has been a global melt-up in equity in the hope that central global banks will cut interest rates early in 2024. Today’s instalment from the ECB pours cold water on the idea that interest rates in Europe will fall anytime soon.

European equity traders were clearly disappointed with the news, and the German DAX dropped 0.4% while the French CAC slipped 0.35%. Equity markets are expected to be choppy for the rest of the session.

The FTSE 100 was unable to shrug off the negativity and slipped in the wake of the announcement, before recovering to trade flat.

However, the gains were contained by overarching positivity emanating from US stocks, particularly the tech sector, amid a raft of upbeat earnings.

“Unbridled optimism about the prospects for the US economy and for its stable of big tech is hard to quash. Expectations are high that stellar earnings projections will show up, and that enthusiasm for artificial intelligence products and services will keep revenues pouring in,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Despite underlying optimism around US tech, Tesla’s Q4 earnings update provided a reason to be cautious as the EV maker sank 8% after saying sales growth would slow in the future.

Tesla has employed an erratic pricing strategy that has failed to boost sales as margins are squeezed amid a price war with Chinese rivals.

“Tesla did an incredible job to get in the fast lane with electric vehicles and steal a march on the rest of the market but as others catch up, the company and its share price are increasingly stuck in traffic,” said Russ Mould, investment director at AJ Bell.

Regarding FTSE 100 movers on Thursday, St James’s Place started the day deep in red after announcing reduced inflows. The company is facing pressure from the regulators over its fee structure and outcomes for clients.

St James’s Place shares were down 5% at the time of writing after being significantly lower earlier in the session.

Helium One Global shares soared on Thursday after announcing upbeat results from its helium drilling campaign in Tanzania.

Helium One Global today provided an update on drilling operations at its Itumbula West-1 well in Tanzania, announcing it has encountered “elevated helium shows” at multiple target depths.

The well reached its target depth of 961 meters in basement rock on 24th January after passing through the Lake Beds Formation, Red Sandstone Group, Karoo Group and other targets. The company reported helium shows over 20 times above background levels while drilling through these zones.

Helium One Global shares were over 60% higher at the time of writing.

Helium readings increased in frequency and concentration in faulted zones encountered during drilling, likely due to the migration of deeply sourced fluids along the faults liberating the helium, Helium One said.

In addition to helium shows, the well also hit high concentrations of hydrogen in the Lake Beds Formation. Elevated hydrogen continued in the Karoo Group and basement.

Wireline logging operations are now underway for further evaluation. This will be followed by drill stem testing across the faulted zone and other zones of interest. Helium One said it remains excited by the initial results and will provide further updates once testing is completed.

Although today’s news has been taken well by the market, it may have come too late for some longer-term holders who have suffered multiple delays and dilutive placings that have eroded shareholder value.

CVS Group shares ticked higher on Thursday after the veterinary services group released rising revenue for the full year ended 31st December and said they expect to deliver full-year results in line with expectations.

The company posted strong revenue growth during the period, with total group revenue increasing 11.4% to £329.9 million compared to £296.3 million in the first half of 2023. On a like-for-like basis, CVS’ sales rose 6.0%, within the 4-8% target range outlined at the company’s Capital Markets Day in November 2022.

A key driver of CVS’ growth continues to be membership in its Healthy Pet Club preventative care program, which reached 500,000 members as of 31 December 2023, up 4.0% from 489,000 members as of 30th June 2023.

The company’s adjusted EBITDA margin held steady at approximately 19%, as a slight improvement in gross margin was offset by increased utilities and other costs, as well as continued investment in support functions.

“CVS continues to be buoyed by an explosion in pet ownership in the UK. The vet-care specialist has seen another round of double digit revenue growth in the first half, and robust like-for-like growth. The group’s mindful of the tough economic backdrop, but has reaffirmed it’s on track to hit full year expectations,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“One of CVS Group’s main strengths is that spending on our pets is an area that we won’t cut back on unless absolutely necessary. That doesn’t make the group immune to a tightening of purse strings, but it does make it more resilient than the average business.”

CVS invested £17.2 million in practice refurbishments, relocations, new equipment and technology during the first half, in line with its target of £30-50 million in capital expenditures per year.

The company remained active on the acquisition front, completing 4 additional acquisitions of small animal veterinary practices in Australia, bringing the total to 13 acquisitions and 15 sites in the first half of 2024. The aggregate initial consideration for these deals was A$103.8 million (£54.6 million).

CVS Group shares were 1.4% higher on Thursday, but the stock still remains well below 52-week highs after the UK’s CMA announced a review into the veterinary market’s practises.

“The cloud of the Competition and Markets Authority’s investigation into the veterinary sector is still lingering. Outcomes are due early this year, and this will be the main driver of sentiment in the short term. Issues surrounding branding when CVS acquires a local practice, as well as pricing transparency are two of the main issues at play. Despite the added pressure this brings, the shares have arguably been oversold in response to the investigation,” Lund-Yates said.

Record highs in US stocks do wonders for investor sentiment, as was the case on Wednesday after another strong session across the pond helped lift European stocks.

Upbeat earnings from Netflix raised hopes tech stocks could provide a catalyst for another leg higher in global equities. At the same time, reports of possible Chinese stimulus sent the FTSE 100’s China-focused stocks sharply higher.

“The FTSE 100 got off to a strong start on Wednesday as US stocks continued to test new records with earnings season getting underway in earnest,” said AJ Bell investment director Russ Mould.

“Reported plans for a big intervention to help restore investor confidence in China helped lift shares with ties to emerging markets including insurer Prudential, banking outfit Standard Chartered and miners.”

The FTSE 100 was 0.3% higher at the time of writing in range-bound trade.

One eye on the UK economy

London’s leading index wobbled briefly earlier in the session following the release of upbeat UK services. Better than expected UK Services PMI data sent the pound higher against the dollar as the all-important service industry showed signs of expansion. Notably, employment in the sector was robust, supporting a healthy picture of the UK economy.

While this is excellent news for the economy, it’s not necessarily good news for stocks.

A rising pound tends to cap gains for the overseas-weighted FTSE 100, and a strong services sector reduces the need for the Bank of England to cut interest rates in the near term to support activity.

Trade on Wednesday represents the gyrations investors should become accustomed to in the coming months as anticipation around the first interest rate cut builds.

FTSE 100 movers

Reports of Chinese stimulus helped propel the miners higher on Wednesday, with the sector dominating the top risers. Fresnillo stormed nearly 6% higher and was the top gainer, closely followed by Endeavour Mining.

Copper miner Antofagasta was in demand as shares rose over 5%. Diversified miners Anglo American and Glencore gained between 2.6% and 3.3%.

Companies with strong ties to China, such as Burberry and Prudential, also showed well on Wednesday.

The risk-on trade was demonstrated by weakness in defensive names such as pharma groups Haleon and GSK.

On Wednesday, Tekcapital provided further evidence that MicroSalt is on the verge of listing in what could be the first AIM IPO of 2024.

The technology investment company said it had disposed of shares in another portfolio company, Belluscura, for the sole purpose of contributing towards MicroSalt’s admission to AIM.

MicroSalt has developed salt technology that lowers sodium intake without sacrificing taste. Millions of people globally die prematurely due to cardiovascular diseases exacerbated by the overconsumption of sodium.

Governments and large food corporations are waking up to the health implications of high-sodium intake and MicroSalt is well-positioned to drive the reduction in consumption.

In 2023, the company recorded a significant year of commercial progress for both its salt shakers and B2B business, including deals with two Fortune 500 companies.

According to the admission document released last year, MicroSalt has established a commercial relationship with one of the world’s largest snack food businesses, and Tekcapital further confirmed substantial orders of bulk low-sodium salt in its annual corporate review.

An updated Schedule One form submitted to the London Stock Exchange in December indicated MicroSalt would list in late January. Given the company has not advised otherwise, the listing could be a matter of days away.

Demand for cheap pints gathered momentum over the festive period with Wetherspoon’s bars enjoying increased like-for-like sales ahead of industry benchmarks.

In the 25 weeks to 21st January 2024, like-for-like sales rose 10.1% versus the same period last year. Bar sales were up 11.8%, with food up 7.9%. Total sales grew 8.4% year-to-date.

Recent trading showed no let-up, with like-for-like sales jumping 11.1% in the last 12 weeks. Wetherspoon continued to outperform the broader pub and restaurant sector, with its December like-for-like growth of 15.2% well ahead of the industry average of 8.8%. This marks 16 straight months of outperformance for Wetherspoon.

The company did see some moderation in the last 3 weeks, with like-for-like sales up 5.8%, but the underlying momentum remains strongly positive heading into the key spring and summer trading periods.

“It’s fair to say that even a cost of living crisis has not dulled the British appetite for a pint at the pub, especially when the pints are going cheap. Wetherspoons’ jump in sales versus last year illustrates that small luxuries will still be afforded within people’s budgets, even when money is tighter than usual,” said Adam Vettese, analyst at eToro.

“The pub group has always been centred on value and this is in focus more than ever, albeit with inflation weighing on input costs in recent times. This value focus will have helped the business to carefully balance costs over the last year and with pressures likely to ease up in the months ahead and with rate cuts coming in, Wetherspoons is very well placed to kick on.”

After a rip-roaring rally in JD Wetherspoons shares from the October in which the stock has gained by third, today’s trading update was the signal for some investors to book profits.

JD Wetherspoons shares were down by 1.5% at the time of writing.

“With the shares up some 75% over the last year and a valuation multiple of about 20x forward earnings, there’s certainly pressure to keep serving up impressive results,” said Derren Nathan, head of equity research at Hargreaves Lansdown.