The FTSE is currently flat after a volatile morning that saw investors and traders react to the meeting between Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar with some trepidation.
UK GDP figures for August also came in today, showing a contraction of 0.1% for the month, worse than the expected 0% change. An upwards revision to this year’s June and July results suggests that the UK economy is still moving forward overall. The biggest drag on national GDP in the three months to August was the production and manufacturing sector (down 0.4%), while services outperformed (up 0.4%).
Taken together, the data for the last three months is being interpreted as a sign that the UK economy will avoid a recession, albeit very narrowly. Unsurprisingly, the big drag on the economy has been the risk of a no-deal Brexit that seems to rear its head every few months, with little indication that the pattern will stop any time soon.
Dunelm Group
The big loser today was homeware retailer Dunelm Group (LSE: DLMN), whose shares are down more than 14% on the day. Despite reporting sales growth of 7.5% in the quarter ended 30 September, the FTSE 250 firm’s stock price is slumping due to “mixed trading” so far this quarter. CEO Nick Wilson commented:
Despite the recent softness in the homewares market and the increased political uncertainty, we are confident we can continue to win market share and our expectations for the full year remain unchanged.
Growth in the group’s online segment accounted for the majority of overall growth – it shot up 34.7% year on year to £35.7m. However, online sales still represent a very small proportion of overall sales, with brick-and-mortar accounting for the majority of revenue – it brought in £219.9m, a like-for-like increase of 2.9% compared with the previous year.
Morses Club
Another big faller today was home credit company Morses Club (LSE: MCL). The company released interim results for the half-year ended 31 August, reporting an 8.6% fall in tax-adjusted profits, causing the stock to fall more than 7% on the day.
This is just the latest setback for shareholders of Morses Club, who have had to watch the stock price fall by almost a third in 2019. They may console themselves with the knowledge that this slump is not wholly tied to the company’s performance – at least some of it has to be attributed to Neil Woodford’s decision to liquidate some of his £13m position in the stock, in order to avoid a liquidity crisis at his Equity Income Fund.
As was argued by Paul Summers elsewhere on the Motley Fool, other investors may have simply been following the trend. Nonetheless, this sell-0ff certainly is linked to a fundamental event at the company, which may lead other investors to re-examine their opinions on it.
