FTSE 100 today: U.K. inflation higher than expected in April; JD, M&S report

UK markets showed mixed performance as April inflation surged to 3.5%, exceeding expectations and likely delaying Bank of England rate cuts. JD Sports shares fell over 10% after reporting a 12% drop in pre-tax profit due to rising costs, while M&S shares dipped 3% following a warning of a $400 million cyberattack impact despite a 6% revenue increase. Conversely, Currys raised its full-year profit forecast, and Coats Group reported revenue growth, though its shares declined, while SSE reported steady operating profit but reduced its investment plans.

Analysis

UK markets opened with a subdued tone, the FTSE 100 marginally declining by 0.06%, amidst a surge in UK inflation to a year-high of 3.5% year-over-year in April, significantly above the Bank of England's 2.0% target and economists' 3.3% forecast. This inflationary pressure, underscored by a sharp 1.2% monthly increase against an expected 1.1%, is anticipated to defer the central bank’s plans for interest rate reductions, while the British pound appreciated 0.3% against the dollar to 1.34. Corporate earnings presented a mixed picture: JD Sports Fashion PLC saw its shares plummet over 10% after reporting a nearly 12% fall in statutory pre-tax profit to £715 million for the 52 weeks ending February 1, attributed to increased acquisition costs, finance charges, and a £53 million rise in adjusting items, despite a 10.2% rise in group revenue to £11.46 billion. Marks and Spencer Group PLC shares declined over 3% following a warning of a $400 million operating profit impact from a cyberattack, with online disruptions expected through July, and a 24% drop in pretax profit to £511.8 million due to a noncash impairment on its Ocado Retail investment; however, group revenue grew 6% to £13.82 billion and adjusted operating profit climbed 17% to £984.5 million. In contrast, Currys PLC raised its full-year adjusted pretax earnings forecast to approximately £162 million from £160 million, exceeding analyst consensus of £159 million, buoyed by a 2% increase in group like-for-like sales. Coats Group PLC reported a 4% revenue increase at constant exchange rates over the first four months of 2025, driven by 5% growth in Apparel and Footwear, yet its shares fell 2.8% at open. SSE PLC maintained steady adjusted operating profit at £2.42 billion for fiscal year 2024/25 but announced a £3 billion reduction in its five-year investment forecast to £17.5 billion, citing evolving economic conditions impacting its energy operations.

Key Decisions for Investors

• Monitor Bank of England communications closely for shifts in monetary policy stance, as the unexpected 3.5% inflation surge significantly increases the likelihood of delayed interest rate cuts, impacting broader market sentiment and asset valuations.
• Adopt a selective approach towards the retail sector, scrutinizing companies like JD Sports where rising costs are eroding profitability despite revenue growth, and M&S which faces substantial near-term headwinds from a cyberattack and strategic impairments, notwithstanding underlying operational strengths in revenue and adjusted profit.
• Evaluate Currys PLC's upgraded profit forecast and consistent 2% like-for-like sales growth, driven by strong Nordic performance, as a potential indicator of resilience and outperformance within the challenged consumer discretionary space.
• Investigate the divergence between Coats Group PLC's reported 4% revenue growth and its 2.8% share price decline to ascertain if unarticulated market concerns or broader sector sentiment are overshadowing positive operational developments.
• Assess SSE PLC's decision to curtail its long-term investment plan by £3 billion to £17.5 billion, despite stable £2.42 billion adjusted operating profits, as a signal of increased capital discipline and a potentially more cautious growth outlook in response to prevailing economic uncertainties.