Sunday share tips: Diageo, Boohoo, Unilever
By Digital Look
Date: Sunday 21 Jan 2018
(ShareCast News) - Shares in Diageo are not cheap but were a 'buy' for the Sunday Times' Inside the City column, which advised stocking them away in your cellar like prize bottle of whisky. The spirits and Guinness maker has been shaken and stirred during since chief Ivan Menezes took the helm in the summer of 2013. He joined amid a lull in American demand for traditional Scotch and vodka, two of the company's key products. Instead, the trend was moving towards 'craft' bourbons and micro distilleries.
What's more, plans to pivot towards the growing band of middle classes in emerging markets were diluted by a wider economic slackening. Menezes took an axe to the cost base and sold off some assets, including wine brands such as Blossom Hill and Yellow Tail for $552m.
Fighting off the naysayers, Menezes has wrestled the US business back into growth mode, helped by the $1bn acquisition of Casamigos super-premium tequila and a number of other brands, while global growth is on a tear. Interim results due this week are expected to show a 10% rise in profit before tax to £2.2bn.
Boohoo.com shares were a 'buy' for Midas in the Mail on Sunday, having recently come off their all-time high. Shares in the online fashion retailer, which targets the 16-24 age group with its own-brand clothing, floated at 50p and topped 250p last summer, since falling to just over 184p.
The drop-off in the share price was due to concerns over profit margins, but "these should be ironed out over time" said Midas. For the year to February 2018, turnover of more than £550m is expected to generate profits of about £45m, up from £295m and almost £25m the previous year. Expansion plans include a doubling in size of its sole warehouse in Burnley, Lancashire, with overseas centres likely to open in time.
Selling prices for its clothes are kept low, often below £20, as part of the 'fast fashion' trend tapped into by the likes of Primark and H&M. Marketing and distribution are strong points for management, using social media including Instagram and Facebook to find customers and gain endorsement from celebrities, such as singer Miley Cyrus and actress Bella Thorne.
'Sell' Unilever shares, was the advice from the Sunday Telegraph's Questor. Late last year, Unilever sold its spreads business for £6bn to private equity firm KKR.
The Anglo-Dutch giant, known for Persil soap powder, Dove soap and Wall's ice cream, has been on a quest to reinvent itself since rebuffing a takeover approach last year from US food group Kraft Heinz. The group is also still to make a decision on its corporate structure.
Big companies such as Unilever are being hit by a trend for shoppers turning their backs on the big-brand staples "in favour of healthier, small-batch alternatives". Unilever boss Paul Polman made 10 acquisitions last year to try and freshen up its product ranges.
But Questor reckons full year results are likely to show the European business has gone backwards once again in 2017 and the group's personal care division has had an underwhelming year. Costs are also expected to have risen, with cuts to marketing budget perhaps hampering future sales.
Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only and not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.
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