Thursday preview: Updates from Tesco, Marks & Spencer, Boohoo and Barratt
Thursday is going to be the busiest day of the new year corporate rush, with post-Christmas updates from retailers including Tesco, Marks & Spencer and Boohoo, plus housebuilder Barratt and recruiter Hays.
Tesco shares have risen almost 40% over the past two years as chief executive Dave Lewis refocuses the business and recently reinstated the dividend after a three year hiatus.
Thursday's quarterly update will cover the 13 weeks to 25 November, alongside a Christmas trading update for the six weeks to 6 January.
For the third quarter, Deutsche Bank expects Tesco to report 1.7% UK LFL sales growth and a 3.2% gain in the six-week Christmas period.
UBS expects 2.4% for the quarter, of which 2.2% from the UK, with the same levels for Christmas.
Analysts at Hargreaves Lansdown said: "When Tesco first unveiled its 2020 targets to reduce costs by £1.5bn, generate £9bn of retail cash from operations and improve operating margins to between 3.5% and 4.0%, those numbers seemed some way off. However, recent progress has been good."
"Next week may only be quarterly results, but the Christmas period means Q3 is the most important quarter of the year. A good performance next week will raise hopes Tesco can meet those medium-term targets, and in turn lift expectations the dividend can increase meaningfully sooner rather than later."
For Marks & Spencer's third quarter the group faces its "toughest comparative in 22 quarters", Deutsche said, though that is only a UK LFL growth rate of 1.3%.
"The period to 30 December represents the first period when the Clothing & Home business is not materially still reducing promotional activity yoy and with Kantar pointing again to full price share losses we forecast LFL down 2%," DB said.
Industry data earlier in the week from Nielsen indicated Marks & Spencer had one of the best grocery sales growth figures in the final quarter, with sales up 3.6% in the final 12 weeks of the year.
UBS said what to watch out for included comment on guidance for gross margin, operational and capital expenditure growth. Food gross margin guidance is currently for between -75 to 125 basis points, with Clothing & Home up 25-75bp. Opex growth has been guided to 2.5-3.5%, with capex £300-350m.
Focusing on a younger clothing audience, Boohoo will report sales and margins for the four months to end-December. Deutsche Bank forecast this period, which generates around 40% of annual group sales, will see sales growth of 83%, with promotional activity driving down group margins by 1.35 percentage points.
Online electrical goods retailer AO World will deliver a third quarter statement on the back of an interim results statement where solid results were accompanied by commentary that full year profits were felt likely to be towards the bottom end of forecast range.
Second quarter sales accelerated to 13.2% from 6.2% in the first despite a UK major domestic appliance market that has been in decline, with AO's growth benefiting an extension of its range into mobile and smart home devices and games console.
For the third quarter, beneficial comparative trends from earlier in the year having annualised, broker Numis expects another period of double-digit UK growth of 14% and 35% from Europe.
House-builder Barratt Developments will give a first-half update ahead of its interim results on 21 February, after a festive period that is not seasonally important for annual sales.
Numis, which forecasts only modest profit growth for the full year as sales prices flatten, expects Barratt will confirm that the group has seen strong trading trends in the half, broadly in-line with last year. "We suspect the group will report that the regions have remained strong and whilst London is likely to have remained challenging, we expect it to have been broadly stable."
Analysts at Deutsche Bank said the statement will be brief, just covering completions, average selling price, and net cash, with a further reference to trading conditions and possibly PBT.
"Barratt’s relatively shorter land bank and its expertise in public sector land should provide scope for the group to achieve sector-leading ROCE [return on capital employed]."
Thursday January 11
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)
Producer Price Index (US) (13:30)
AO World, Barratt Developments, Boohoo.com, Booker Group, Domino's Pizza Group, Grafton, Hays, Hilton Food Group, Jupiter Fund Management, Marks & Spencer Group, Nichols, Premier Oil, Rathbone Brothers, Tesco
SPECIAL EX-DIVIDEND DATE
Scottish Inv Trust, Sky
Debenhams, European Investment Trust, Fenner, MySquar Limited (DI), Unicorn AIM VCT
FINAL EX-DIVIDEND DATE
Baring Emerging Europe, Brewin Dolphin Holdings, Character Group, Connect Group, DotDigital Group, Henderson Alternative Strategies Trust , Income & Growth VCT , Majedie Investments, On The Beach Group , Patisserie Holdings , Scottish Inv Trust, Third Point Offshore Investors Ltd. GBP Shares, UDG Healthcare Public Limited Company, Unicorn AIM VCT , Urban&Civic , WH Smith
INTERIM DIVIDEND PAYMENT DATE
Alliance Pharma, Caledonia Investments, D4T4 Solutions
INTERIM EX-DIVIDEND DATE
QinetiQ Group, Workspace Group
QUARTERLY PAYMENT DATE
GlaxoSmithKline, Total SA, XP Power Ltd. (DI)
QUARTERLY EX-DIVIDEND DATE
JPMorgan Asian Investment Trust, Middlefield Canadian Income PCC, Primary Health Properties