With all the excitement of interest rate announcements by the Bank of England and Federal Reserve out of the way, the attention turns back to corporate earnings.
The week ahead will be retail-heavy with Marks & Spencer Group PLC (LON:MKS), J Sainsbury plc (LON:MKS) and Associated British Foods plc (LOON:ABF) among those due to report.
Investors will be keen to see how well they fared amid a tough retail market, which has been tackling fierce competition and a slowdown in consumer spending.
Brexit uncertainty has sent the pound lower and inflation higher, putting a strain on household incomes and prompting consumers to tighten their purse strings.
The squeeze on consumers has hit UK retailers, including Next Plc (NXT), which on 1 November warned of “extremely volatile” trading ahead of the key Christmas season.
Primark continues to carry parent ABF
Given the cautious comments on current trading recently from high street peer Next, investors will once again be focusing on the performance of its Primark clothing stores when ABF unveils its full year results on Tuesday.
Back in September, AB Foods saw its shares fall after a pre-close season update as worries over cost pressures in its grocery business and expectations for currency tailwinds to reverse offset a raised its outlook for full year 2016/17 results thanks to a strong performance from its Primark.
The FTSE 100-listed firm said then that Primark had “experienced an even lower level of markdown” in the fourth quarter, helped by favourable weather, which further improved the group’s full year outlook.
It added that Primark's full year sales are expected to be 13% ahead of last year at constant currency, driven by increased retail selling space and like-for-like sales growth of 1%, while at actual exchange rates sales are expected to be ahead 20%.
But with Next predicting a 0.3% decline in full price sales of its own-brand items for the full year, around the mid-point of its September guidance, investors will be a little nervous about Primark’s performance.
M&S to sing sIMIlar song to Next
M&S and Next are not directly comparable – Next does not sell a lot of quinoa and couscous for one thing – but the latter's recent trading statement does not bode well for M&S.
Next said sales performance had remained extremely volatile and highly dependent on the seasonality of the weather, so expect M&S to sing a sIMIlar song when it reports its interims on Wednesday.
In times past, the food division could be relied upon to provide some pizazz to the figures but in the first quarter of the financial year (to 1 July) even like-for-like sales here had gone ex-growth, albeit only just – down 0.1% year-on-year.
“While things at Next are looking better than they did earlier in the year, the group noted a sharp decline in sales in October. We’re hoping this doesn’t mean M&S’ Clothing & Home division has suffered from similar trends; however, with Next attributing the slowdown to unseasonal weather, it certainly can’t be ruled out. Still, that’s not to say there’s nothing but bad news in the offing,” said Danny Cox at Hargreaves Lansdown..
“This time last year, the group unveiled a new strategy. The key themes were a rationalisation of sales space and the continued roll-out of the Foods business. Investors will be looking forward to reading about progress over the last 12 months,” Cox added.
Argos in focus for Sainsbury’s
Sainsbury’s investors will be hoping the supermarket chain can surprise the markets once again on Thursday like it did with its first quarter update in August.
Back then Sainsbury’s said new addition Argos continued to perform well and grow its market share in the quarter which helped total retail sales jump 2.7% and the catalogue retailer will be in focus once again.
Argos had been the crutch keeping Sainsbury’s up for a little while, but the core business seems to be picking up again.
That said the company’s shares haven’t really done much in recent years as (until recently) low food price inflation and increasing competition weighed heavily.
Food prices are starting to rise again but rivals aren’t going anywhere. Like the rest of the ‘Big Four’ Sainsbury’s continues to lose market share to German discounters Aldi and Lidl.
To try and remain competitive Sainsbury’s has been looking to slash its cost base, including axing thousands of jobs, so that will be of interest too.
Direct Line to continue solid performance
A third quarter update from blue chip insurer Direct Line Group PLC (LON:DLG) should show a continuation of the solid performance seen in the first half numbers released in August.
Back then, the FTSE 100-listed firm unveiled a jump in its interim dividend following a rebasing of the payout as it reported strong growth in half-year profit as motor insurance premiums rose.
Direct Line’s operating profit from ongoing operations rose by 9.5% to £354.2mln for the six months to June 30, up from £323.6mln a year earlier
Insurers also got a boost in September after UK ministers proposed a partial reversal of changes previously announced to the measure used to determine personal injury pay-outs.
Back in March, the government cut the Ogden discount rate – which is the formula used to decide how much compensation should be awarded as a lump sum – to minus 0.75% from 2.5%.
But following consultation, Justice Secretary David Lidington backtracked slightly and suggested that the rate would likely be bumped up to between 0% and 1%.
More Brexit smack talk from Wetherspoon
Expect more Brexit smack-talk from JD Wetherspoon chairman Tim Martin when the value pub chain gives its first quarter trading update on Wednesday.
The well-known Brexiteer has strong views on the topic and isn’t against using the company’s statements to air them.
As for the business itself, ‘Spoons said in its full-year results back in September that it had got off to a good start in the current fiscal year.
The FTSE 250 group has been saying for a while now that it needs sales growth of around 3-4% this year if it wants profits to break through the £100mln barrier again this year.
The UK consumer has come under more and more pressure from rising inflation and stagnant wage growth in recent months, although Wetherspoon – with its value offering – seems to have been by-and-large unaffected by it. Keep an eye out for any hints that this may be starting to change.
Same old story for AstraZeneca
It’ll likely be the same old story for UK drugs giant AstraZeneca PLC (LON:AZN) when it publishes its third quarter report on Thursday.
Product sales are likely to edge lower once again as loss of patents on its Crestor (statin) and Seroquel (bipolar) blockbuster drugs continue to impact performance.
As has been the case in recent quarters deals to sell-off ‘non-core’ parts of the business – such as a US$555mln deal to sell off its anaesthetics business to Aspen – should mean that externalisation continue to offset that though.
That can’t last forever though, so investors will be looking for updates on Astra’s pipeline which looks to be in decent shape despite the failure of the much-hyped MYSTIC lung cancer trial over summer.
In short, the numbers themselves don’t really matter but the market will instead be looking at what lies beyond.
Halfords on the right road
Bikes and car parts seller Halfords showed signs of being back on the right track in its last update, so shareholders will be hoping that the momentum has continued when the company issues its half-year results on Thursday.
The trading update on 5 September covering the 20 weeks to 18 August revealed a particularly strong performance from the Cycling and Travel Solutions arms, but the Autocentres business remains in turnaround mode.
Chief executive Jill McDonald is off to run Marks & Spencer's clothing business - good luck with that one - so there probably will not be a lot of forward looking commentary in the results as Graham Stapleton, currently the head of Dixons Carphone's software business, will be taking over the helm in January and will have his own ideas about the future direction of the business.
New boss looking to make his mark at Burberry
On Friday, fashion firm Burberry updates on third quarter trading, and it will be the first under the stewardship of new chief executive officer Marco Gobbetti.
German bank Bereneberg is predicting stable sales development on the wholesale side; allied with the ongoing transition in the licensing business, this leads Berenberg to forecast group revenue of £1.25bn, up 2% on an underlying basis.
Owing to roughly £12mln of foreign exchange related gains, it forecasts adjusted profit before tax will clock in at £174mln.
Significant events expected:
Monday November 6:
Interims: Grafenia Plc (LON:GRA)
Finals: CPL Resources PLC (LON:CPL), Beximco Pharmaceuticals Ltd (BXP)
Trading updates: Morgan Advanced Materials plc (MGAM)
Tuesday November 7:
Finals: Associated British Foods plc (LON:ABF), Imperial Brands PLC (LON:IMB), Up Global Sourcing Holdings PLC (LON:UPGS)
Interims: Direct Line Insurance Group PLC (Q3) (LON:DLG), Carclo PLC (LON:CAR), First Derivatives PLC (LON:FDP)
Trading updates: Convatec Group PLC (Q3) (LON:CTEC), Hiscox Limited (LON:HSX), Tyman PLC (LON:TYMN)
Economic data: UK consumer credit
Wednesday November 8:
Trading updates: JD Wetherspoon PLC (LON:JDW), Novae Group PLC (NVA), OneSavings Bank PLC (LON:OSB), Persimmon PLC (LON:PSN), Tullow Oil plc (LON:TLW), esure Group PLC (LON:ESUR)
Interims: J Sainsbury plc (LON:SBRY), Marks & Spencer PLC (LON:MKS), JZ Capital Partners PLC (LON:JZCP), Sophos Group PLC (LON:SOPH) Wizz Air PLC (LON:WIZZ), Workspace Group plc (LON:WKP)
Finals: Begbies Traynor Group PLC (LON:BEG), Tracsis PLC (LON:TRCS)
Economic data: RICS UK housing survey
Thursday November 9:
Trading update: AstraZeneca PLC (Q3) (LON:AZN), Aldermore Group PLC (Q3), (LON:ALD), Arrow Global Group PLC (Q3) (LON:ARW), Coca Cola HBC (Q3) (LON:CCH), IMI PLC (LON:IMI), Inmarsat Plc (Q3), (LON:ISAT), Beazley PLC (LON:BEZ), Derwent London PLC (LON:DLN), Informa PLC (LON:INF)
Interims: Dairy Crest Group PLC (LON:DCG), Halfords Group plc (LON:HFD). Prime People PLC (LON:PRP), Renewi PLC (LON:RWI), SSE plc (LON:SSE), Wincanton PLC (LON:WIN)
Finals: Craneware PLC (LON:CRW), Gattaca Plc (LON:GATC), Go-Ahead Group PLC (LON:GOG)
Economic data: UK balance of trade data; US weekly jobless claims, US wholesale inventories
FTSE 100 ex-dividends: GlaxoSmithKline, Whitbread plc
Friday November 10:
Interims: Burberry Group PLC (LON:BRBY), Castings PLC (LON:CGS), Volex PLC (LON:VLX), Vedanta Resources PLC (LON:VED)
Finals: Daejan Holdings PLC (LON:DJAN), Mid Wynd International Investment Trust plc (LON:MWY), Photo-Me International plc (LON:PHTM)
Economic data: UK industrial, manufacturing data