It will be a busy time for retail in the coming week with updates expected from a raft of high street names include clothing, food and homewares stores firm Marks & Spencer Group PLC (LON:MKS), B&Q DIY chain owner Kingfisher PLC (LON:KGF), and car parts to bicycles retailer Halfords Group plc (LON:HFD)
Full-year results from FTSE 100-listed M&S are likely to be a downbeat affair, especially now even its food sales have gone ex-growth.
In the final quarter of 2017, the firm’s like-for-like (LFL) food sales in the UK declined by 0.4% year-on-year, joining the Clothing & Home division in the ex-growth doghouse - the latter saw LFL sales decline 2.8% from a year earlier.
Credit Suisse has predicted a 4.5% falls in M&S’s pre-tax profit to £539mln in fiscal year 2018/19, driven by weak like-for-like sales but with less pressure from foreign exchange headwinds.
It estimates a 0.4% drop in like-for-like sales in clothing and a 0.5% increase in like-for-like sales in food over the whole year.
Kingfisher first-quarter sales weak too
Meanwhile, fellow blue-chip Kingfisher has been working hard to overhaul the business but these efforts have been undermined by an overall weakness in the UK retail market.
The company, which owns Screwfix as well as B&Q, reports its first-quarter trading update on Thursday and investors will be hoping for an update on the progress of its five-year restructuring plan, which is now in its third year.
In the year to the end of January 2018, Kingfisher’s pre-tax profit fell 8.1% to £683mln on and like-for-like sales dropped 0.7% as growth at Screwfix and its Poland businesses were offset by a decline in France and slowdown in fourth quarter sales in the UK.
The market expects the weak trends to continue in the first quarter due to an unfavourable external backdrop, according to Deutsche Bank.
The German lender anticipates a 3.5% drop in Kingfisher’s like-for-like sales for the quarter.
“Industry data in France for the first two months of the quarter, as well as UK peers which have reported, suggest a combination of weak seasonal and also slowing core DIY sales,” the bank said.
Deutsche added: “Once through what is likely to be a difficult Q1 release, the next news is the Wesfarmers strategic review on 7 June. This could very likely free up market share in the UK for B&Q.”
Special divi on the way at Halfords?
Among the mid-cap retailers, Halfords’ full-year results on Tuesday will be the first set of numbers to be presented since new chief executive Graham Stapleton joined in January.
The recent unseasonal weather is unlikely to have done much for the retailer’s bikes business, although recent weakness there could be offset by higher sales in the car parts and repairs division.
Sales have been growing but at a time when the weaker pound is making its imported stock more expensive, pressuring margins and leading to sliding profits.
Investors will be hoping to see signs that that trend is reversing, particularly with the (albeit temporary) pick-up in sterling earlier in the year.
Halfords is guiding for a full-year pre-tax profit of £71.4mln, but analysts at Deutsche Bank reckon there is a chance for a small beat, forecasting £72.4mln. They also reckon a special dividend “is possible”.
Topps Tiles full-year guidance eyed
Another retail focus will be FTSE 250-listed Topps Tiles Plc (LON:TPT) which reports its first-half results on Tuesday, though since the company has already told investors what to expect the focus will be on its outlook for the rest of the year.
In a trading update in April, the tiles retailer said total revenues rose to £109.4mln in the 26 weeks to 22 May, up from £106.6mln for the same period a year earlier.
Like-for-like revenues rose 0.6% in the period, compared to a 1.9% decline in 2017, with a strong first quarter offsetting a weaker second quarter.
The company said second-quarter sales were hit by the so-called ‘Beast from the East’, which brought snowfall and icy temperatures across to the UK from Siberia.
Many customers decided to remain indoors during the cold weather while the snow also affected deliveries and the ability of some people to get into work.
Topps Tiles also blamed an earlier Easter and tough UK retail market for the weaker sales in the second quarter.
"After a strong start to the year, market conditions have become more challenging over the second quarter," said chief executive Matthew Williams.
In a bid to boost sales, the group has been making improvements to its stores, website and product range. Market participants will be looking to see if these efforts to turnaround the business have started to yield results as well as any full year guidance provided.
Water, water everywhere
Away from the high street, the UK’s three biggest listed utility companies – Severn Trent PLC (LON:SVT), United Utilities Group PLC (LON:UU.) and Pennon Group plc (LON:PNN) – are all set to release their full-year numbers next week.
With core revenues being tightly regulated, there’s not much scope for their results to stray too far from expectations, so upcoming changes to regulation are likely to be the focus.
Ofwat’s price review, due to come in for 2019, will likely pose more of a challenge for the three firms above and their unlisted peers, so look out for commentary around any impact of the new rules.
Utilities are all about their dividend pay-outs, so investors will be hoping to see a strong grip on costs to keep the bottom line looking healthy.
Analysts are expecting Pennon to generate sales of £1.4bn and operating profits of around £320mln.
Deutsche Bank is guiding for Severn Trent to post a 4% rise in pre-tax profits to £545mln, while it expects United Utilities – the bigger of the three – to turn a profit before tax of £639mln (+3% y-o-y).
Npower deal comment needed from SSE
Staying with utilities, undoubtedly, there will be some commentary around the Npower transaction when energy distributor SSE plc (LON:SSE) reports results on Friday.
Focusing on the business in its existing form, Deutsche Bank analysts expect to see “close to flat” earnings, despite an anticipated drop in network profit.
“An increase in renewable production should help offset the negative impact of the partial gas distribution sell down and regulatory timing effects in electricity distribution,” the analysts said in a preview note.
“We expect the business update presentation after the results to focus on the infrastructure businesses to remain after the GB Retail spin-off - mainly networks and generation.
“However, we remain more concerned about the future of the retail business under a default tariff cap and in transition to the new billing platform.”
Deutsche Bank has a ‘sell’ rating for SSE as it sees the shares as “expensive” because of the risks in the retail side of the business.
Softer outlook eyed at Ryanair
Ryanair Group PLC (LON:RYA) will likely guide for softer profits for 2019 due to rising costs with its full-year results on Monday, including but not exclusively due to higher fuel pricing, according to analysts at UBS.
But, for the 2018 results statement, UBS is forecasting full-year revenues at €6.96bn, up 5% from €6.64bn in the 2017 financial year.
Net income (adjusted), meanwhile, is estimated by the Swiss bank at €1.46bn which would be ahead of expectations for €1.4bn and €1.45bn (consensus is for €1.44bn).
It has been a somewhat volatile period for the airline. In February, Ryanair said it expects fare prices to fall and “localised disruptions” as it recognises unions for its pilots.
The budget airline previously agreed to recognise a union for its 600 UK pilots following a dispute over rotas. It is also expected to extend union recognition to cabin crew.
More fizz at Britvic
Elsewhere FTSE 250-listed beverage maker Britvic Plc (LON:BVIC) release first-half results on Wednesday with analysts at Numis Securities forecasting sales to rise by around 3.5% though they see earnings per share being flat.
The City broker also queried the potential impact of the recently introduced sugar tax in the UK:
“Whilst we think that it is too early for the full impact of the Sugar Tax, in the UK and Ireland, to be fully realised we will look for comments around the initial implementation and feedback from customers,” its analysts said in a note earlier this month.
They added: “Other key areas of focus are likely to be the performance of the new Robinsons range extension, an update on the progress of the US multi-pack Fruit Shoot penetration, the implications for H2 margins (if any) in light of recent moves in input costs, namely PET, aluminium and sugar and finally its view of the consolidation in the UK grocery retail market.”
Sweet numbers from Tate & Lyle?
Mid-cap ingredients group Tate & Lyle PLC (LON:TATE) publishes its final results on Thursday and investors will be looking for some sweet news.
However, following the release of first-quarter results from North American competitor Ingredion Inc (NYSE:INGR) at the start of May, analysts at Liberum thought that the impact on Ingredion’s operating profit of higher freight and production costs in the region will also impact Tate & Lyle and could weigh on its results and outlook for the coming year.
The results will be the first for new chief financial officer Imran Nawaz, who succeeded Nick Hampton after he was made chief executive of the company in April.
Good reading at Bloomsbury Publishing
Some books these days give you a sneak preview of the next instalment in the series and to a certain extent, Bloomsbury Publishing PLC (LON:BMY) did that a couple of months ago with its results.
It alerted the market that it expected revenues to be ‘slightly ahead’ of expectations and profits to be ‘well ahead’ of expectations for the year ended 28 February 2018.
The Harry Potter series publisher also said its net cash balance is now expected to be around £25mln, ‘significantly ahead of expectations.”
The focus in the full-year results, therefore, is likely to be on current trading and its plans for IB Tauris, the acquisition of which was announced at the beginning of the month.
It is depressing to think that we are already having to start thinking about Christmas but from Bloomsbury’s perspective, the Yule-time line-up is crucial.
Prior to that comes the academic year, which with Bloomsbury having ploughed a lot of its Harry Potter windfall profits into that area is also a key season for the publisher.
UK data deluge
Aside from the flood of corporate news, there will also be a deluge of UK economic data to be released in the coming week, most notably the latest inflation numbers.
Last time out, CPI surprised to the downside, dropping to 2.5% from 2.7% previously, the second consecutive month in which headline inflation fell.
However, economists at RBC Capital look for the rate to hold at 2.5% for April as falling fuel prices, which have helped inflation retreat by more than expected in recent months, looks to have reversed last month with pump prices rising 1.6% month-on-month.
Meanwhile, the second reading for first quarter UK GDP is unlikely to be revised from the initial reading of a softer than expected growth of 0.1% quarter-on-quarter.
The RBC economists said, outside of some upward revisions to construction output, there has been little in the data released since the ONS gave its first GDP estimate to suggest a rebound in activity toward the end of the quarter which makes it difficult to make a strong case for any upward revision.
Significant events expected:
Monday May 21:
AGMs: BP PLC (LON:BP.)
Finals: Ryanair PLC (LON:RYA), Mckay Securities PLC (LON:MCKS) LXI REIT PLC (LON:LXI)
Interims: Barloworld Ltd (LON:BWO)
Economic data: Rightmove UK house prices; US Chicago Fed National Activity index
Tuesday May 22:
Interims: Topps Tiles Plc (LON:TPT), Greencore Group PLC (LON:GNC), Nostrum Oil & Gas PLC (Q1) (LON:NOGN), Oxford Biodynamics PLC (LON:OBD), Renew Group PLC (LON:RNWH), Shaftesbury PLC (LON:SHB), UDG Healthcare PLC (LON:UDG), Watkin Jones PLC (LON:WJG)
Finals: Halfords PLC (LON:HFD), Bloomsbury Publishing PLC (LON:BMY), Big Yellow Group PLC (LON:BYG), Entertainment One Limited (LON:ETO) First Derivatives PLC (LON:FDP), Homeserve PLC (LON:HSV), Intermediate Capital Group PLC (LON:ICP), Scapa Group plc (LON:SCPA), 1Spatial PLC (SPA), Schroder Real Estate Investment Trusts Limited (LON:SREI)
Trading updates: Close Brothers Group PLC (LON:CBG), Riverstone Energy Limited (LON:RSE)
AGM: Royal Dutch Shell PLC (LON:RDSA)
Economic data: UK public sector finances; Richmond Fed manufacturing index
Wednesday May 23:
Finals: Marks & Spencer PLC (LON:MKS), Severn Trent PLC (LON:SVT), Dairy Crest Group PLC (LON:DCG), Babcock International PLC (LON:BAB), Great Portland Estates PLC (LON:GPOR), HICL Infrastructure Company Ltd (LON:HICL), Optibiotix Health PLC (LON:OPTI), Vedanta Resources PLC (LON:VED)
Interims: Britvic Plc (LON:BVIC), easyHotel PLC (LON:EZH), Hollywood Bowl Group PLC (LON:BOWL), Ixico PLC (LON:IXZI), Sanderson Group PLC (LON:SBD), Stride Gaming PLC (LON:STR), ZPG Plc (LON:ZPG)
Economic data: UK CPI, PPI, HPI inflation; US new home sales; US flash PMI composite index; US FOMC minutes
Thursday May 24:
Trading updates: Kingfisher PLC (Q1) (LON:KGF), Go-Ahead Group PLC (Q3) (LON:GOG), Inchcape PLC (Q1) (LON:INCH), Intertek Group PLC (Q1) (LON:ITRK)
AGMs: Lloyds Banking Group PLC (LON:LLOY)
Finals: United Utilities PLC (LON:UU.), Tate & Lyle PLC (LON:TATE), Talktalk Telecom Group PLC (LON:TALK), Electrocomponents PLC (LON:ECM), Helical Bar PLC (LON:HLCL), Mediclinic International Plc (LON:MDC), NewRiver REIT plc (LON:NRR), QinetiQ Group PLC (LON:QQ.), Renewi PLC (LON:RWI), Wizz Air Holdings PLC (LON:WIZZ)
Interims: Daily Mail & General Trust PLC (LON:DMGT), Paragon Banking Group PLC (LON:PAG), Shoe Zone PLC (LON:SHOE)
Ex-dividends: To clip 3.2 points off FTSE 100 – Bunzl PLC (LON:BNZL), Carnival PLC (LON:CCL), DCC Plc (LON:DCC), Imperial Brands PLC (LON:IMB), Wm Morrison Supermarkets PLC (LON:MRW), Whitbread plc (LON:WTB)
Economic data: UK retail sales; US weekly jobless; US existing home sales
Friday May 25:
Finals: SSE plc (:LON:SSE), Pennon Group plc (LON:PNN), Volvere PLC (LON:VLE)
Trading update: Spectris plc (LON:SXS)
Economic data: UK second reading Q1 GDP; US durable goods orders; US University of Michigan final consumer sentiment