What's going on?
Crivens! Scottish soft drinks company AG Barr – purveyor of Irn-Bru, Snapple, Rockstar, and some seriously good ads – lifted its kilt on Tuesday to reveal that its profit this year would be 20% lower than last. The gruesome spectacle led to investors sending its stock down 30%.
What does this mean?
Barr’s blamed reliably unreliable British weather: a year ago, the UK was in the midst of a heatwave, creating more thirsty customers. But a slow start to 2019’s #hotgirlsummer has meant fewer sales. Furthermore, Barr’s move to change the recipe of its signature drink – famously “made from girders” – in a bid to avoid the UK’s recent sugar tax has caused a significant stramash.
There was some good news for girder-guzzling Brits on Tuesday, however. Data showed the average wage rising at its fastest pace in eleven years in the three months to May, with record-low unemployment perhaps making finding and keeping workers more expensive. Crucially, wages are still growing faster than the prices of goods and services, leaving the average Brit with a little more to spend on rounds of low-sugar soda.
Why should I care?
For markets: Irn-Bru just got cheaper, America.
The value of the pound on Tuesday fell to its lowest level since 2017 compared to the US dollar – and to its lowest in six months versus the euro. The drop was seemingly thanks to fresh Brexit uncertainty (are you getting déjà vu too?). Companies like AG Barr might be beneficiaries of the pound’s weakness, however: while it only makes 4% of its sales outside the UK, a cheaper pound could make its products appear more attractive overseas.
Zooming out: Higher profit doesn’t always mean a higher share price.
Sugary drinks’ natural enemy, Listerine mouthwash maker Johnson & Johnson, reported higher-than-expected second-quarter earnings on Tuesday – but its stock fell 1%. The healthcare conglomerate’s update was likely overshadowed by news of an investigation into whether it knowingly lied about the cancer risks of its talcum powder…