Market commentary

BP spent years trying to reinvent itself as an energy company, and this quarter it looks set to have made its money being a very good refinery. Oil prices slipped, but Middle East disruption sent refining margins soaring, though some of that looks to have been given back on the forecourt.

BP isn’t pumping much more oil and gas than it was a year ago. The company reported an earnings boost, but most of the help came from events outside its control, and if, or when, the Middle East calms down, refining margins could fall as fast as they rose.

Another $3bn to $4.5bn of expected write-downs, mostly on low-carbon businesses, shows the cost of transitioning away from a green focus. 

BP is on course to hit its net debt target more than a year early, which leaves its balance sheet in much better shape than it has been for years.

Attention now turns to BP’s strategy update in New York in December, Meg O’Neill’s first as chief executive. With the debt largely dealt with, shareholders will want to know what comes next, whether that’s bigger buybacks or a clear plan to grow production.

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Greggs is quietly becoming a drinks brand. The home of the sausage roll leaned on matcha and cherry lemonade to get through a scorching summer, and its push into protein, salads, and functional drinks shows it’s following customers towards healthier habits.

New shops are doing most of the work. Existing stores delivered less than half the growth, and once inflation is taken into account, customers aren't buying much more than they did a year ago.

Q4 will see a sprint on the building sites. To hit its target, the sausage roll superpower needs to open roughly three-quarters as many shops in the final quarter as it managed in the first nine months.

The factory shake-up is the tougher news. Around 740 jobs could go, which is a big call for a business proud of making its own products, though spending £60m to save £20m a year pays for itself in about three years.

Savour the 2026 upgrade, because Greggs is already flagging higher costs and inflation for 2027. The high street stalwart has survived a heatwave and a cost-of-living crisis, but a £1.50 sausage roll could be a real test of loyalty.

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This should have been Irn-Bru’s dream summer, with a heatwave, Scotland at the World Cup, and a fresh rebrand. Barr still outgrew the market, but around £10m of sales slipped away because it couldn't get stock onto shelves, thanks to factory upgrades which caused disruption.

Supply chain problems are fixable. But fading demand isn't. Strip out the acquisitions and growth looks flatter. Barr has swung from £41m net cash to net debt after two deals and a year of factory spending. AG Barr bought Frobishers and posh mixer brand Fentimans. It’s used cash and borrowing to do it, betting it can grow those brands faster inside Barr than they’d grow alone.

So, a lot’s riding on the second half. Barr needs roughly 16% profit growth in H2 after under 3% in H1, and guidance has shifted from double-digit revenue growth in August to around 10% today. It's a tweak, but the market will notice.

The long-term bets are revealing. Boost Water+ shows Barr can win in the functional hydration category, which has grown fast as shoppers move away from sugary fizzy drinks. But cocktail brand FUNKIN’s sales falling by a sixth show how premium trends can waver, thanks to headwinds out of the firm’s control. With Fentimans added and fuel costs not yet passed on to shoppers, the firm’s pricing power is about to be tested.

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We already knew Next was topping expectations, but today’s £12m upgrade to FY profit guidance adds a certain je ne sais quoi.

The guidance upgrade and growth in H1 profit before tax feel like the standout features here, but the results add much needed context to the international flavour of Next’s recipe for success.

For starters, H1 online international sales growth outstripped company guidance and substantially drove total product sales.

But will the second half be quite so spectacular for this increasingly important part of the business? Next might have upped H2 guidance for online international sales growth to 20.5%, but it acknowledges tougher comparatives. 

It also notes that a significant proportion of international growth has been driven by increased digital marketing, with just 1% attributed to underlying growth. Results for the current period will offer real insight into how sustainable this is over the longer term.

The other side of the coin is that things look softer in the UK. Margins have improved slightly, which does counteract the sales slowdown in retail stores, but perhaps the key is the trim to H2 UK sales growth expectations from 2.8% to 2.0%. While the UK might provide Next’s foundations, it looks increasingly like the retailer has its eyes trained overseas in search of growth.

Barratt Redrow’s headline numbers might have met expectations, but next year’s potential for slowing completions looks a troubling snag.

We already knew Barratt Redrow was towards the top end of guidance for FY2026 with 17,667 completions, but next year looks a little trickier. Trimmed guidance of 17,500-17,900 completions for the current year actually allows for a possible dip, with planning delays cited as the key culprit.

Then, there’s the issue of margin deterioration. Adjusted gross margin slid 210 basis points to 15.3%, indicating the business paid a pretty hefty cost to get completions over the line. Incentives are set to stay elevated in the current year, while build cost inflation is projected at between 3% and 4%. If lower margins persist and completions slow or decline, profits may be in peril.

While Barrat Redrow acknowledged enacted planning reforms may improve its ability to build, it clearly thinks further systemic change is needed. It also called for more assistance for builders and buyers alike to support the sector. 

For investors, this gloom was accompanied by confirmation of their final dividend being cut to a token penny. Having seen its shares trading at what it considers a discount, Barratt Redrow is instead prioritising buybacks as its preferred form of shareholder returns. However, this may turn off income-focused investors.

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WH Smith has again delivered bad news on profits, as muted revenue growth appears to have been gobbled up by rising costs. 

While not explicitly a downgrade, today's trailed FY group profit before tax and non-underlying items of approximately £75m is right at the bottom of prior guidance, itself cut twice this year, and significantly below the £108m achieved the year prior. 

Revenues might be edging higher, it’s margin trouble that’s creating the problem, as promotions and inflation-related costs bite.

The gap between total and like-for-like revenue growth shows most of WH Smith’s gains are coming from opening new locations, rather than improving sales in existing stores. In conjunction with the impact of promotional activity on margins, it would seem WH Smith is having to spend money to make money.