Worries about economic growth are to the fore again, after a couple of consumer groups warned on the outlook.
Whitbread, the Premier Inn, Beefeater and Costa Coffee business, said first half profits had climbed by 11% and revenues by 14%, but chief executive Andy Harrison sounded a note of caution:
Our consumer market context continues to be broadly flat. Against this background we expect to continue to outperform our competitors and like for like sales growth to be more moderate than the high levels achieved in the first half.
The company’s shares are down 55p to £22.68 and James Hollins at Investec said:
Whitbread’s first half was marginally behind our estimates and there is no impetus from the trading outlook statement to warrant a 2013 forecast increase. The strong first half top-line performance is unlikely to be replicated in the second six months and we retain our bear stance given our negative view on the group’s UK hotels and restaurants returns and limited international hotel growth opportunities. Costa remains an exciting story, but, for superior long-term group growth and returns, we prefer InterContinental.
A profit warning from luxury goods group Mulberry indicated the problems were more widespread, and the news hit Burberry shares, down 47p at £11.25. Burberry itself issued a warning on trading in early September.
Jonathan Pritchard at Oriel Securities said Mulberry’s UK performance was fine, with the difficulties mainly in overseas markets:
We think that these international problems are becoming a developing trend in retail and in general. The first inkling of this came from Tesco at their interims (we had to take overseas targets down by 20% earlier in the month). We would emphasise our view that Mulberry trades in a different market to the parts of the retail sector that we cover. However the wider picture will make us keep an eye on developments at Ted Baker and Supergroup in particular, and to a degree Mothercare and Asos. Read-across for Burberry would be negative too.
With this negative news, investors were shying away from risk once more, so mining and banking shares were unwanted. Kazakhmys is down 30.5p at 726p while Royal Bank of Scotland has fallen 4.5p to 277p.
Lloyds Banking Group is 0.72p lower at 40.095p as Nomura repeated its reduce rating and Invested issued a sell note. Investec analyst Ian Gordon turned to the Netherlands for his latest negative thought on Lloyds:
It may not surprise that, as per CBS data yesterday, Dutch house prices fell in September; down 0.5% month-on-month, down 7.9% year-on-year. Indeed, we may be guilty of obsessing on this issue given that Lloyds has somewhat bigger problems at home, e.g. payment protection insurance, where we expect a material increase in its existing £4.3bn provision, or its £327bn UK mortgage portfolio with 11.1% in negative equity even before prices fell 1.6% in the third quarter. But we do see Lloyds’ Dutch exposure as a drag on its (generally improving) bad debt story. We do not suggest that Dutch impairments are likely to become individually significant in group terms, but given the lightly provisioned, high loan-to-value nature of Lloyds’ £5.8bn exposure, with some risk of a sustained decline in asset values, we expect impairments to grow from nominal levels seen to date.
Overall the FTSE 100 down 36.51 points at 5846.40.
This article originally appeared on guardian.co.uk
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