Stores sink as FTSE 250 has worst day in a year
PANIC-strICkeN investors pulled £900m from Ftse 100 retailers yesterday as the outlook for shoppers turned sour in a perfect storm of bad economic news.
the Office for National statistics reported that Uk retail sales volumes fell 1.2pc in May, exceeding the 0.8pc drop predicted by markets, as inflation continued to squeeze households.
Average store prices were up 2.8pc on the year, their largest growth since March 2012.
It comes on the back of inflation hitting its highest level since June 2013 on tuesday, at 2.9pc, alongside weak wage growth. the morning also saw sofa seller
DFS Furniture issue a profit warning after political and economic worries led to an unanticipated drop in demand.
It now expects annual profits to be between £82m and £87m, down from £94.4m in its last annual results. shares fell 20.6pc, or 52p, to 200p. the Bank of england complicated matters with a 5-3 split vote in favour of leaving interest rates on hold, which led the pound to strengthen.
the market is now pricing in a one-in-three chance of an interest rate rise by the end of the year, up from one in 20 before the decision taken yesterday.
the FTSE 100 fell 0.74pc, or 55.04 points, to 7419.36, with few stocks staying in the black.
Fashion retailer Next fell 6.1pc, or 264p, to 4037p, and Marks and
Spencer was down 4.7pc, or 17.5p, to 351.8p.
the more Uk-focused FTSE 250 mid-cap index fared even worse, tumbling 2.1pc, or 421.04 points, to 19,553.66; its worst day in a year. Frankie & Benny’s operator
Restaurant Group was down 5.9pc, or 20.7p, to 329.3p, while DFs’s peers Howden Joinery and
Dunelm Group slumped by 5.1pc, or 23.3p, to 431p, and 6.2pc, to 39.5p, to 600.5p respectively.
Meanwhile, shares in the furniture and flooring firm SCS Group sank 8.1pc, or 13.6p, to 153.75p and fashion brand Ted Baker fell 5.6pc, or 140p, to 2345p.
Laith khalaf, senior analyst at Hargreaves Lansdown, said: ‘sentiment towards the Uk retail sector is remarkably fragile at the moment, and any signs of a consumer squeeze are being seized upon as a reason to take a great big red pen to the share prices of these companies.
‘retailers are undoubtedly facing tough times as inflation looks set to hit household budgets.’
Miners were also among the Ftse’s biggest losers following a drop in copper and gold prices and a rise in the dollar following the Federal reserve’s decision to hike interest rates on Wednesday.
Fresnillo fell 7.3pc, or 122p, to 1558p, while Anglo American was down 6pc, or 63.9p, to 995.1p, and Randgold Resources sank 4.9pc, or 365p, to 7100p.
One of the few strong Uk performers was the beleaguered oil firm Petrofac, which enjoyed another day in the black after being raised to ‘Buy’ from ‘Hold’ by analysts at Jefferies.
shares in the Jersey-based firm crashed last month when it was revealed that the serious Fraud Office had launched a criminal probe into allegations of bribery, corruption and money laundering in connection to the firm’s use of consultancy services from Monaco-based Unaoil.
But Jefferies said any resulting fine was likely to come in below other analysts’ predictions at around £156.6m, and would not have to be paid until 2019. shares rose 3.9pc, or 15.9p, to 421p.
Investors also piled into smoke and carbon monoxide detector maker Sprue Aegis, betting on an increased focus on fire safety in the aftermath of this week’s tragic fire in London. shares rose 10.3pc, or 20p, to 215p.