Market Analysis: Volkswagen, John Lewis, Vistry, Dilveroo, Moonpig, Berkeley

Volkswagen: Solid performance in EU and North America despite slowdown in EV demand; Challenges in China due to competition from chinese automakers; Partnership with XPeng could be the game changer. John Lewis: Department stores continue to struggle, sluggish housing market is not helping; More store closures are expected; Margins are underpressure due to rising labor wages and input costs. Vistry: Shift towards partnerships is reducing profit margins; The drop in interest rates could also drive demand for Vistry's homes on the open market. Deliveroo: Exploring new verticals like grocery and retail could further expand GTV growth; Rider costs are Deliveroo’s biggest cost; Deliveroo Plus can increase retention but loss delivery fees. Moonpig: The market is struggling due to inflation and rising living expenses; Increased competition from Amazon and traditional retailers; Diversification is crucial but gifting revenue holds relativeyly low significance. Berkeley: Material prices have stabilized, but labor inflation remains a concern; higher construction costs due to new fire safety regulations post-Grenfell and challenges in acquiring land and obtaining planning permission.


Orwa Mohamad an analyst at Third Bridge made a series of remarks regarding Volkswagen, informed by the insights from industry experts:

“Volkswagen reported a solid performance in both Europe and North America. This success comes despite challenges such as a slowdown in EV demand and mounting pressure to produce more EVs due to stricter European regulations. Our experts believe that Volkswagen's volume is expected to continue growing in 2024, likely reaching around 9.5 million units worldwide. Mainstream brands like Seat will be the main drivers of this growth.

“In recent months, China has been the point of concern as BYD surpassed Volkswagen to become the top-selling brand in the country. Volkswagen faces challenges in China, including perception as an old legacy player, and stiff competition from domestic brands on EV innovation and software. Our experts say Chinese customers tend to favour more innovative and affordable cars from local brands such as BYD, XPeng, Zeekr, and SAIC.

“The partnership with XPeng could potentially turn this around, but investors will have to wait until the production begins in 2026. Our experts believe XPeng is the right partner, given their specialised expertise in China's EV market, particularly in software and autonomous driving technology.”

In the UK department store space, Yanmei Tang, Analyst at Third Bridge writes regarding John Lewis: "The department store industry continues to struggle amid a cost-of-living crisis. Our experts say John Lewis, with its significant reliance on home sales for revenue, may face even greater challenges ahead. The persistently sluggish housing market is unlikely to provide any relief.

“John Lewis also faces stiff competition from online giants like Amazon, as well as newcomers such as M&S and Next. They need to maintain its differentiation in assortment and keep real exclusivity of some of the brands.

“Expectations are for more store closures as they adjust their footprint, with increased investment in key locations. Despite this, our experts say John Lewis' strong online presence means that while store closures may occur, sales are likely to shift online rather than being lost entirely.

“Margins are being squeezed by rising labor wages and input costs. John Lewis faces the challenge of maintaining its value proposition without simply raising consumer prices.”

Regarding UK housebuilding space, Yanmei Tang, Analyst at Third Bridge comments on Vistry and Berkeley

“Vistry's shift towards partnerships is reducing profit margins. However, our experts note that Vistry's financial position looks stronger compared to other builders, with a higher cash reserve.

“The UK housing market is gaining momentum again, thanks to lower interest rates. Our experts say that private developers may exploit this to increase profits.

“Nonetheless, the drop in interest rates could also drive demand for Vistry's homes on the open market. Additionally, there could be a rise in demand for rental properties (PRS) as investor returns become more enticing.

“Partnerships tend to target complex brownfield sites, while private developers favor simpler greenfield land. Brownfield sites often come with contamination and remediation challenges, leading to delays. However, Vistry seems well-equipped to handle these risks.”

Berkeley: “Our experts say that the UK homebuilding market looks much better than it did in 2023. They have observed a significant increase in viewings and offers, thanks to lower mortgage rates and improved consumer confidence.

"Material prices have stabilized, but labor inflation remains a concern due to a shortage of workers and their demand for higher wages. Berkeley is well-positioned to absorb cost increases, thanks to healthy cash reserves resulting from no bank debt, coupled with sales prices set above book value.

"Additionally, Berkeley is also grappling with higher construction costs due to new fire safety regulations post-Grenfell and challenges in acquiring land and obtaining planning permission.

“Our experts say that Berkeley's long-term land bank, acquired strategically through large brownfield site acquisitions, helps mitigate current land acquisition issues."

In the food delivery space, Albie Amankona, Analyst at Third Bridge made a series of remarks regarding Deliveroo:

“Our experts believe that aiming for mid-teens growth in Gross Transaction Value (GTV) over the long term is a sensible goal. Exploring new verticals like grocery and retail could open up exciting opportunities for further expansion. If macroeconomic conditions improve and Deliveroo sees a surge in user numbers, there's potential for even greater growth.

“Rider costs are Deliveroo’s biggest cost. Our experts say margin expansion to 4% appears achievable through optimization. However, striking a balance between pricing, restaurant commissions, and rider compensation is crucial to maintaining consistent service quality and rider satisfaction.

"Roughly a double-digit percentage of users are on Deliveroo Plus, but proportions vary widely by city. Our experts say that while subscriptions increase retention and loyalty, they require trade-offs such as the loss of delivery fees.

“Our experts highlight Deliveroo's strong network effects in the UK food delivery market, which solidify its leadership position. Competitors like Just Eat and Uber Eats would need considerable resources to compete with Deliveroo's pricing and service standards.”

Yanmei Tang, Analyst at Third Bridge also comments on Moonpig:

“Our experts say the UK's card and gifting market is struggling due to inflation and increased rising living expenses. Average order sizes are shrinking, and customers are less willing to pay for customized gifts.

“Moreover, increased competition from giants like Amazon and traditional retailers offering similar products at lower prices erodes their uniqueness.

“While Moonpig enjoys strong brand recognition, diversification is crucial. Currently, gifting revenue holds relatively low significance.

"Our experts anticipate that Moonpig will likely maintain its market share in the UK. However, to drive further growth, they should explore expanding their market share in other regions, such as the US or Europe.