Pets at Home shares ticked higher on Wednesday after the pet supplies company announced rising sales and profits that met expectations.

The pandemic boom in sausage dogs and other furry friends is long behind us, and Pets at Home is feeling the pinch. The cost-of-living crisis hasn’t helped, with consumers being forced to cut back on spending on new accessories for their pets.

That said, some of Pets at Home’s products fall into the consumer staples basket rather than discretionary spending, providing the company with some stability in the current environment. 

“Pets at Home has come good on downgraded expectations. The group’s not immune to a challenging consumer environment and has been hit hard by the need to keep prices low in order to stoke growth. Convincing pet owners to part with additional cash for money-makers like accessories has been a far more arduous task then when people feel flush with cash,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

Despite Pets at Home’s operating environment being far from favourable, sales rose 5.2% in the full year, and the company met already downgraded pretax profit expectations of £132m.

“The more difficult backdrop is masking some fundamental strengths though. Pets at Home remains in a more resilient position than the average retailer. The group is primed to benefit from the huge boost in pet ownership, and a broader step change in ways of life, which includes putting our four-legged friends at the centre of our lives,” Lund-Yates said.

Lund-Yates continued to explain the ongoing concerns investors may have around Pets at Home, given the CMA investigation.

“There’s an element of guaranteed income, in that pet-owners will continue to buy food and medicine for their cats and dogs, regardless of how tough times get. Along the same vein, the vet business is doing well too. There is, of course, the overhang from the CMA’s ongoing investigation into the veterinary sector, which is denting sentiment. This has arguably been overdone though, with the current valuation not fully reflecting Pets at Home’s resilient market position and enviable net cash hoard.”

Notwithstanding regulatory concerns and slower consumer spending, investors seemed pretty happy with a £25m share buy back, and shares were 4% higher at the time of writing.

Last week we felt that the index looked vulnerable to a pullback, in the end this bout of expected selling only really materialised on Thursday. The concern for the bulls is the strength of the selling on Thursday, posting a sharp bearish “outside day” candle.

This does suggest that when sellers emerge they are ready to come in with some size. As a result we do feel that the risk/reward of buying or even being 100% long here does not look that favourable.

As stated last week opening shorts would be too bold as the underlying weekly trend is so strong, but we would recommend lightening up on certain sectors if you can, and perhaps opening shorts on some vulnerable looking names within the index, or be tempted to pivot across to commodities, or bonds until the situation becomes a little clearer.

The market could drop down to the previous resistance line, now support, black line, currently around 5,100. Only if this level were to break would we start to be more concerned that this expected near-term profit taking was building into anything more serious.

The FTSE 100 was an exemplary reflection of the weather in London on Tuesday as the index dipped in soggy, uninspiring trade.

The index started the session higher, but the minor gains quickly turned to minor losses as utility companies, housebuilders, and miners weighed on performance.

The FTSE 100 was down 0.35% at the time of writing.

There was a noticeable bid in GBP/USD on Tuesday, which added to the downside in the FTSE 100 as major overseas earners HSBC, AstraZeneca, and Diageo slipped.

Investors will also have one eye on a series of global economic data due for release later this week in the form of US PCE, Chinese Manufacturing PMIs, and several Federal Reserve speakers.

“Later this week a second estimate of US GDP for the first quarter, the core PCE reading of inflation which the Federal Reserve likes to pore over when making decisions on rates, and Chinese manufacturing figures are likely to dominate the market’s agenda,” said Dan Coatsworth, investment analyst at AJ Bell.

Federal Reserve speeches have recently put the markets on the back foot after senior figures suggested that a Federal Reserve rate cut over the summer was far from nailed on.

Ocado

After JP Morgan amended its price target to 450p on Friday, Ocado had another strong session, gaining over 8%, suggesting that something more material was at play that hadn’t been announced by the company.

Amazon had previously been rumoured to have an interest in making a bid for Ocado, and there is mounting shareholder pressure for the company to switch to a US listing to gain a better valuation. However, there is no suggestion developments in either one of these considerations are driving Ocado shares higher on Tuesday.

JD Sports was also among the risers after announcing it would delay the release of its full-year results but was confident in meeting the guidance set out earlier in the year. JD Sports shares were over 6% higher at the time of writing.

NatWest’s share sale by the UK government has been thrown up in the air as it shifts into full election campaigning mode.

With the Tories a country mile behind in the polls, it’s unlikely the Conservative Party will have the chance to push forward with the plans. It will be down to Labour to decide on the best course of action for the UK public’s holding of NatWest.

The scheme, together with a new ‘British ISA,’ was part of the Conservative plan to boost the general population’s involvement in stock markets. 

The UK has well-received past privatisation schemes, with 25% of people surveyed investing in a privatised company between 1970 and 2014, according to a study by Opinium and Hargreaves Lansdown. 

However, just 21% of these people continued to build a wider portfolio, suggesting that privatisation schemes have a limited impact on people’s ongoing involvement in listed equities. 

“The NatWest share sale, announced by Chancellor Jeremy Hunt, has been put on ice, due to the General Election campaign. The Spring Budget 2024 set out that a sale would take place this summer at the earliest, subject to supportive market conditions and achieving value for money for the taxpayer. But now the retail offer will not happen during the election period,” said Susannah Streeter, head of money and markets Hargreaves Lansdown.

“Schemes like this have the power to encourage new investors, so it’s hoped this will be revisited by whoever wins the election.

“Past privatisation schemes, brought in newcomers and super-charged investing habits for many novice shareholders, but others refrained from dipping their toe further into the market, and heightened interest in the stock market ebbed away during following years.”

The UK needs to dramatically improve financial literacy, and such share schemes can help inclusion.

Among the measures outlined by the Conservative government, plans for an additional £5,000 ISA allowance to invest in British companies were met with greater scepticism by the industry. Interestingly, Labour is reported to be keen to push forward with the British ISA.

Plans for Nightcap’s possible offer for rival Revolutions Bars lay in tatters after it was concluded that Nightcap’s plans were unworkable.

After a series of meetings, Nightcap and Revolution Bars concluded that completing a deal was heavily reliant on additional fundraising rounds. Revolution Bars deemed these a bridge too far, given the current environment for the pubs and clubs industry and the wider equity market. 

The UK’s bars and pubs scene has never quite recovered from the pandemic. It also faces worrying trends of people increasingly drinking at home and younger people drinking and going out to bars less than they used to. Younger people now tend to prefer attending the UK’s many festivals rather than spending time in bars. This favours neither Nightcap or Revolution Bars.

“Revolution Bars appeared to confirm suspicions that combining with Nightcap would just double the problems facing the two troubled night spot operators. It is striking to see a company say a bid is ‘incapable of being delivered’ and Revolution Bars continues to push shareholders to stick with its own restructuring plan,” said Dan Coatsworth, investment analyst at AJ Bell.

“The bigger issues, throbbing away in the background like an insistent beat, are the rising costs and waning demand faced by this end of the hospitality sector. Fewer younger people are in the habit of going out drinking on a regular basis, meaning late-night operators need to come up with new ways to keep people frequenting their outlets.”

Revolution Bars shares were down over 6% at the time of writing.

Chariot Limited, the Africa-focused transitional energy group, has announced promising results from its latest gas well in Morocco.

The OBA-1 well, part of a two-well drilling campaign at the Dartois prospect in the Loukos Onshore license, was drilled safely and efficiently on schedule and within budget.

Evaluation of the well data, including wireline logs, cuttings, and gas readings, revealed the presence of reservoirs spanning approximately 200 meters in gross thickness – matching pre-drill targets.

Significantly, and most interestingly for investors, an approximate 70-meter gross interval exhibited elevated resistivities coincident with elevated mud gas readings, indicating potential gas pays with no water-bearing reservoirs identified.

Chariot Limited shares were 5% at the time of writing.

Further analysis is underway to prepare for well flow testing, which will determine the well’s productivity and the gas resource potential of the discovery. The well will be suspended to facilitate future rigless flow testing operations and potential use as a producer well, after which the rig will be demobilized.

Chariot, as the operator with a 75% stake in the Loukos license, has partnered with ONHYM, which holds the remaining 25% interest. The company’s successful drilling campaign in Morocco marks a significant step forward in its Africa-focused transitional energy strategy.

“We are very pleased to report the successful drilling of the OBA-1 well at the Dartois prospect which now concludes Chariot’s first onshore drilling campaign in Morocco and brings with it positive results for the potential of the Dartois area,” said Duncan Wallace, Technical Director of Chariot.

“We will now integrate the comprehensive data we have obtained from both the RZK-1 and OBA-1 wells with recently reprocessed 3D seismic data to understand the resource potential of the Dartois area, to confirm the optimal future work programme on the discovery and the impact on wider prospectivity across the Loukos licence. Our two first wells have both been successful in confirming our geological model for reservoir distribution and the presence of gas which bodes well for future exploration activity.

“I would like to thank both our operational team, who once again have shown that that they can drill safe, efficient and successful wells, and ONHYM for their ongoing support and partnership. Our focus on the Loukos licence is to get any commercial discoveries to first gas as quickly as possible.

“We now look forward to the offshore drilling campaign planned for Q3 2024, on the Anchois gas field, with our new partners Energean, where we are looking to increase the development to over 1 Tcf.”