27th May 2021
Good morning It’s official – the rumoured purchase of iconic Hollywood studio, MGM, by Amazon has been announced. At $8.5bn it’s Amazon’s second largest acquisition ever. It means that content ranging from James Bond and Tom & Jerry to The Real Housewives and Rocky will be coming to Amazon Prime. Your move Netflix and Disney+…
Food in, fashion out at M&S
Property boom shows no signs of slowing
Yesterday's market moves
FTSE 100 0.0% 7,027 FTSE 250 +0.9% 22,640
It was another quiet day in the market with little macro news to digest. Investors continued to weigh the chances that support for the economic recovery from coronavirus could start to be withdrawn. The FTSE 100 closed flat and FTSE 250 rose 0.9%.
RETAILFood in, fashion out at M&S
What’s going onMarks & Spencer made a loss of £201 million in the past year. The clothing and home unit was most impacted by lockdown restrictions and its revenue fell by 32%. Food fared better and increased 7%. M&S is planning on ramping up store closures and transforming more of them into food only outlets.
. Why is this importantM&S is unique among retailers in that its clothing and home division is about half the size of its food department.In recent years food has been the star performer (special mention to Percy Pigs and Colin the Caterpillar) but the online channel was non existent for most of 2020; it was only in September that it launched a food delivery service with Ocado. Which isn't great when all your competitors has this from the start of the pandemic.Anyhow the partnership has proven successful and now one quarter of every Ocado delivery is M&S products, and the venture contributed £78m of profit.The 137 year old retailer has had issues long before the pandemic. Many reading this may be too young to remember but at one point in time M&S clothes were the height of fashion.More recently it has struggled to keep up with the styles customers want. The current strategy is to double down on food, streamline the clothing operations and sell more online.
TakeawayM&S was slow out the gate with online food sales but the progress of the Ocado partnership is promising.Despite the huge loss the market reacted positively to the results, especially the plans to transform the business, shares rose 8.5% to the highest level since February 2020.
PROPERTYProperty boom shows no signs of slowing
All those looking to get on the property ladder this year, avert your eyes now. The UK housing market has defied gravity during the pandemic. Many had expected the fallout from the lockdown restrictions would hurt the market but over a year on, and there’s barely a week that goes by without data showing that property prices have reached new heights. The latest analysis from property portal Zoopla shows that the total value of homes sold in the UK is expected to reach £461bn this year, the highest since 2007.More than 1.5 million home transactions are forecast, a massive 45% more than the year before. Wales, Yorkshire and the Humber, and the north west are the hottest regional markets.Four things that have driven the boom:
An estimated £150bn of savings has been built up over the pandemic which has given many people the ability to put up healthy deposits.
The pandemic has increased the demand for larger homes outside of city centres.
Stamp duty holiday introduced last summer means that nearly nine out of 10 transactions are no longer subject to the tax.
Record low interest rates have made mortgage repayments more affordable.
On the horizon… it remains to be seen whether the end of furlough in September will lead to an increase in unemployment. If the jobless rate rises this could dampen consumer confidence which is so key to property market.
Stat of the day
A recent poll in Japan found that 83% of the population think the postponed Tokyo 2020 Olympic games should be cancelled (43%) or postponed again (40%)
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