Market commentary

Trainline's newest numbers might not scream full steam ahead, but they may steady the journey after a bumpy few weeks for shareholders.

While net ticket sales remained broadly flat, total group underlying revenues dipped slightly as a drop in UK consumer revenue weighed. The business says demand in the UK remained strong throughout the period, but highlighted fare freezes and operational challenges such as strike action and weather-related disruption as headwinds. 

Tightening of refund rules also significantly reduced UK consumer revenue. New industry policy means certain refunds must be requested by the end of the day before a journey, eliminating the prior generous, and ripe for exploitation, 28 day post journey window.

Numbers might remain in line with guidance, but given that Trainline’s share price was derailed last month by a regulatory blow from the CMA and hasn’t clambered back onto the tracks since, it would have helped shareholder confidence if the business had knocked things out the park. 

But the numbers here are maybe not impressive enough to distract from the regulator’s ongoing investigation into possible drip pricing. Here, the CMA is essentially checking whether Trainline shares full ticket prices, including any mandatory fees, with customers early enough in the booking process. To be clear, no wrongdoing has yet been found.

What might offer investors some cheer is a newly announced 12-month share buyback programme, covering as much as £100m. Coupled with steady, if unspectacular, performance and unaltered guidance, this may offer shareholders reassurance that the business is still chugging along despite regulatory issues.

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Primark is turning to at-home delivery with like-for-like sales growth from existing stores seemingly stuck in transit.

The high-street giant, which currently exists as ABF’s retail arm, expects total sales to grow by 2% in Q4, but new stores look like the driver here. Like-for-like sales are slated to fall by 3%, with a 4.3% dip on the Continent standing out as a weak spot. 

With investment in price, product, and marketing not yet moving the needle on sales growth, Primark has taken a big leap with the announcement of home delivery. 

However, detail is pretty light on when this will actually happen, with the business confirming only that it will be available in Great Britain ‘in the future’. The business’s experience with Click & Collect and online channels will of course help, but sending products to customers’ doorsteps is a significant economic and logistical challenge, and may take time to implement.

Turning to ABF’s food business, there are continued issues for Sugar, with adjusted operating losses from the division now seen as coming at the higher end of guidance amid low prices in Europe. 

With adjusted operating loss expected to deepen to between £70m and £170m in 2027, the division looks like being the headache of the soon-to-be independent Food business. However, recent positive pricing moves may sweeten things a little for ABF in future years.

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We already knew the problem for Dunelm is that while sales are growing, stubborn profits refuse to budge. 

While today’s strategy update shows the retailer has a clear plan to change this, investors shouldn’t anticipate any short-term movement, as adjusted profit before tax is slated to remain flat across FY27. 

The problem for Dunelm has been steadily growing operating costs, which rose by nearly £30m last year to largely undo the gains offered by higher revenue and gross margin improvement. Dunelm’s answer is its ‘Winning Hearts & Homes’ stratagem. 

Key to this is the removal of £100m in what Dunelm calls unproductive costs over the next three years, while boosting capital expenditure by approximately £125m above its current run rate over the period. In return, the business has its sights set on improving revenue growth with store and digital expansions, as well as better customer loyalty. 

The upshot is that FY27 looks like being a year of investment and refinement, rather than a year of profit growth, particularly as Dunelm noted that heatwaves led to a significantly softer start to trading. For investors, that means exercising a little patience as they wait to see if Dunelm’s plan will live up to its kitschy title.

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