What to watch: Burberry soars on upgrade, Berkeley sinks, and JD reveals Polish deal

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·6-min read
UK luxury fashion brand Burberry store in the Soho neighborhood of New York, US. Photo: Anthony Behar/Sipa USA/PA
UK luxury fashion brand Burberry store in the Soho neighborhood of New York, US. Photo: Anthony Behar/Sipa USA/PA

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Burberry soars on sales upgrade

Iconic British luxury brand Burberry (BRBY.L) soared to the top of the FTSE 100 (^FTSE) on Friday after telling investors recent sales had been better than expected.

Shares in Burberry rallied over 8% in London after the company said "a strong rebound" in sales in December meant revenue and operating profit were likely to be ahead of forecasts.

Burberry said it now expects fourth quarter sales to be up 28%-32% on last year, which would mean full year revenues would fall by only about 10% despite COVID-19 disruption.

Adjusted operating margin is now forecast to be between 15.5% and 16.5% for the full year.

"There were concerns the fashion icon’s products would fail to resonate, with the pandemic stopping customers from splurging on big-ticket clothing," said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown. "The sales gap isn’t as severe as feared though, and is a textbook case of the value of a strong brand."

Berkeley sinks

House builder Berkeley (BKG.L) sunk to the bottom of the FTSE 100 (^FTSE) after warning that lockdown means house sales would likely be 20% below last year's levels.

In a trading update, Berkeley Group said it had delayed the launch of new developments to coincide with the reopening of the economy. Home reservations were likely to be 20% below last year's levels as a result of the "re-profiling".

Berkeley warned it was also facing "some materials delays and price increases in specific areas" although "the overall impact on build costs has been neutral."

The company said it "continued to trade robustly" and "remains on track to deliver, in line with guidance, a similar profit to last year". Berkeley said profits next year would like be flat.

Shares sunk 5%.

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JD's Polish deal

JD Sports (JD.L) has announced a deal to buy 60% of Polish sporting goods retailer MIG for an undisclosed sum.

MIG operates 410 sporting goods stores across central and Easter Europe under the brands ‘SIzeer’ and ‘50 style’. The group had sales of £200m last year.

"This is an exciting acquisition for JD that will further build on the success of our international development strategy, expanding our operations into Central and Eastern Europe," JD's executive chairman Peter Cowgill said.

JD said it had structured the deal in a way that allows it to potentially buy the entire business further down the line should it want to. The deal, which is subject to regulatory approval, is expected to close in May.

"In our view, this is another tidy and interesting bolt-on acquisition again showing the global ambition of the JD brand," said Greg Lawless and Clive Black, retail analysts at Shore Capital.

Shares in JD were up 0.1% in London.

UK GDP shrinks in January

The UK economy shrank at the start of the year as the country returned to lockdown, but output declined by much less than economists were expecting.

Data published by the Office for National Statistics (ONS) on Friday showed UK GDP shrank by 2.9% in January. Economists had forecast a month-on-month decline of 4.9%.

The slump was also much smaller than the fall in GDP seen during the first lockdown last year. Businesses have been better able to adapt to restrictions this time around and consumers have been more willing to spend.

The pound weakened against the dollar on the back of the data, which was published alongside figures showing a sharp decline in trade between the UK and EU.

"While the data beat expectations, the depth of the economic contraction continues to weigh on the pound at a time when a resumption in rising US yields places pressure on the risk environment in the G10 space," said Simon Harvey, a senior FX market analyst at Monex Europe.

Sterling was down 0.4% against the dollar to $1.3937 (GBPUSD=X) and flat against the euro (GBPEUR=X).

UK-EU trade falls by most on record

Exports to the European Union (EU) fell by 40% at the start of the year as Brexit took effect.

The Office for National Statistics (ONS) said on Friday that exports to the EU fell by 40.7% in January 2021, equivalent to £5.6bn ($7.8bn) less trade with the bloc. The slump in exports was the main driver of a 19.3% fall in UK exports to the world at the start of the year.

Imports from the EU also suffered, declining by 28.8% or £6.6bn. The ONS recorded big declines in imports of cars, medicines and pharmaceuticals.

The ONS said the declines were the biggest monthly falls in both imports and exports from the EU since records began in 1997.

The slump came as Brexit occurred on 1 January 2021. Britain officially left the single market, meaning new customs checks and trading rules took effect.

Businesses stockpiled goods ahead of the transition and the ONS said this surplus could have contributed to the decline in trade at the start of the year. A return to national lockdown may also have contributed and global supply chain issues could have played a part.

European markets retreat

European stocks were weak at the opening bell on Friday, as official data confirmed another economic slump for the UK and futures markets pointed to a tech sell-off on Wall Street later today.

The FTSE 100 (^FTSE) opened down 0.3% on Friday after data from the UK's Office for National Statistics (ONS) showed GDP shrank by 2.9% in January.

The DAX (^GDAXI) fell 0.2% in Germany, retreating from a record high reached on Thursday. The CAC 40 (^FCHI) fell 0.1% in France. Connor Campbell, a market analyst at SpreadEx, said there was "an air of hesitation" in Europe.

Sentiment wasn't helped by movements in the US futures market.

US stocks have been on a tear over the last few days, as Wall Street has enjoyed a tech-driven rally. That looked set to come to a screeching halt on Friday, with Nasdaq futures (NQ=F) pointing to a 1.2% slump at the open in New York. It follows a 2.5% rally for the index on Thursday.

S&P 500 futures (ES=F) suggested a 0.4% drop at the open after the index reached a new record high overnight. Dow Jones futures (YM=F) were flat.

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