Equity traders will have to wait until the end of the coming week for the most interesting corporate news, with food retail giant Tesco PLC (LON:TSCO) set to deliver a trading update, but economists will be kept busy by the latest Federal Reserve and ECB policy meetings and a big batch of UK data.
Investors eyeing Tesco’s first-quarter update on Friday will be focused on how its latest addition – wholesaler Booker – has settled in.
The UK’s largest supermarket group – soon to be second largest if the merger of J Sainsbury plc (LON:SBRY) and Asda goes ahead – completed the Booker acquisition in March and analysts are expecting it to boost Tesco’s top and bottom lines this year.
Focus will also undoubtedly be on sales in its core UK grocery business which generates the lion’s share of profits, with Deutsche Bank expecting 1.6% growth in like-for-like UK sales – a slight slowdown from the 2.3% achieved in the final quarter of last year.
Keep your eyes peeled too for any commentary on the recent decision to shut down the non-food Tesco Direct website.
Meanwhile, fellow blue-chip grocer Wm Morrison Supermarkets PLC (LON:MRW) will host its annual general meeting on Thursday.
The chain has been steadily growing like-for-like sales in recent quarters, although much of this has been driven by price-cutting, so margin worries remain.
Challenges remain the same for PZ Cussons
Among products on the supermarket shelves, Imperial Leather soap maker PZ Cussons PLC (LON:PZC) is due to issue a trading update on Thursday, with the firm somewhat unusual in the world of consumer goods.
While most of its peers look to Europe and North America to make a large chunk of their profits, most of PZ Cussons’ business comes from Africa. It is also unusual in that relatives of its founder, George Zochonis, still own almost a third of the company’s shares.
Despite its differences, there is nothing unfamiliar about the challenges facing the billion-pound consumer goods group. Cost inflation, increasing competition and cash-strapped consumers in Nigeria – its largest single market – and the UK have weighed on margins and volumes.
PZ Cussons has responded by slashing costs and narrowing its new product pipeline to focus on a smaller number of higher-impact launches, although the effects from those initiatives are unlikely to have been felt yet.
For the year just gone, the consensus among City analysts is for pre-tax profits of £81.7mln on sales of £780.4mln.
Ted Baker in fashion
Elsewhere on the high street, Ted Baker PLC (LON:TED) will release a trading update on Tuesday, which will be eyed closely after it flagged up a cautious start to the financial year back in March
The FTSE 250-listed firm saw its pre-tax profit increase by 12.3% to £68.8mln in the 52 weeks to 27 January 2018, up from £61.3mln a year earlier, as its revenue rose by 11.4% to £591.7mln, up from £531.0mln.
However, the company warned that it anticipates that external trading conditions will remain challenging across many of the group's global markets.
City views are mixed - US broker Jefferies downgraded its stance for Ted Baker to ‘hold’ from ‘buy’ following the cautious outlook, but Goldman Sachs upgraded fashion retailer to ‘buy’ from ‘neutral’ in April.
Can Boohoo.com sustain its growth
Moving online, clothing retailer Boohoo.com PLC (LON:BOO) will post a trading update on Tuesday, and investors’ focus is likely to turn back to sales momentum.
Boohoo.com almost doubled sales for the year ended February 28, 2018, up 97% to £579.8mln from £294.6mln, but analysts were concerned whether the firm will be able to sustain such growth.
Analysts at Deutsche Bank said: “We forecast a small pick-up in Boohoo.com brand growth to 22% in the first quarter despite tougher prior year comparatives, and gross margins of 49.4%.”
Glass half full at Majestic Wines
Meanwhile, expectations for full-year results from wine seller Majestic Wine PLC (LON:WINE) were carefully lowered in April.
The retailer then announced plans to accelerate growth by materially increasing investment in new customer acquisition, though it warned that that might reduce earnings by £2-3mln.
The AIM-listed firm said it already invests around £12mln a year in attracting new customers and plans to invest an additional £9mln to £12mln.
The fruits of the investment might emerge in months rather than years but even so, it might be too soon for Majestic to report on whether the new initiative is having any effect.
Analysts are expecting Majestic to report a headline pre-tax profit of £17.2mln on revenue of £480mln, with the group targeting at least of £500mln in fiscal 2019. The full-year dividend is predicted to rise to 5.67p from 3.60p.
Construction time for Bellway
Half-year results from house-builder Bellway PLC (LON:BWY) in March were a tad better than the market had been expecting, with earnings per share up 17% year-on-year.
Revenues rose by 15%, driven by unit growth of 6% and an 8% increase in selling prices, which was consistent with guidance given at the February trading update.
“Bellway has said that reservations per site per week were broadly steady in the first half, and we can infer that the sales rate has been a bit slower since 1 February year-on-year compared to the prior year,” said Liberum at the time of the interims, so this Tuesday’s focus will be on whether there has indeed been a slowdown in the sales rate.
The latest trading update will also reveal whether the firm is still on track to increase output by 600 units over the full-year.
The average selling price is expected to top £280,000 while margins are predicted to be around 22%.
Crest Nicholson more subdued
If Bellway was in buoyant mood with its most recent trading update, sector peer Crest Nicholson Holdings PLC (LON:CRST) provided a nasty surprise in May with its trading update.
A subdued housing market is hurting Crest Nicholson's ability to sell some of its pricier units, prompting the company to warn that operating margins would be around the bottom end of its 18-20% guidance range.
There have been suggestions in some quarters that the dividend might be under threat and the interim dividend might give a clue whether this is the case.
“As Crest is paying a dividend driven by EPS cover, the distribution could be expected to fall in line with PBT unless the board re-writes the policy and allows cover to drop below 2x or begins to prescribe dividend levels,” Shore Capital observed.
Mike van Dulken at Accendo Markets was also taking a cautious view, saying, “If market inertia builds further and costs can’t be controlled, the company could be set for a big squeeze.”
Fed rate rise predicted
The latest two-day Federal Reserve FOMC meeting, which concludes on Wednesday, is expected to increase US interest rates by another 25 basis points, moving it up to 1.75%–2.00%.
In a preview of the meeting, economists at RBC Capital commented: “The market has been pricing >80% probability of this outcome for some time, so it would not come as a surprise.”
They added: “We don’t anticipate dramatic changes in the characterization of economic growth or inflation in the press statement, as these have evolved largely as expected.”
But they concluded: “At some point, the Fed will have to more forcefully acknowledge the run-up in market-based measures of inflation.”
QE the key for ECB meeting
Meanwhile, it has been well flagged over recent days that the European Central bank will hold a discussion on the future of its QE programme after its planned expiry in September at its council meeting in the coming week.
That has raised the possibility that the ECB could make an announcement on Thursday as to whether or not to extend the programme or allow it to expire as planned.
However, RBC Capital’s economists say their central expectation remains that the ECB will hold off until July to make that announcement.
They said; “At that point, we think the programme will be extended by three months to take it to the end of this year, and we expect President Draghi to use his press conference to give a flavour of the GovCo discussions while signalling that we can expect something substantive in July.”
UK inflation and wage growth eyed
Although commentators are now predicting that the Bank of England might be unlikely to undertake a hike in interest rates this year following last week’s dovish policy meeting, the coming week’s big batch of UK economic data will still be scrutinised closely, particularly the latest inflation numbers.
Rising fuel prices have made headlines of late in the UK, as pump prices jumped in May reflecting higher crude prices, so CPI inflation for May is forecast to increase to 2.6% year-on-year, up from 2.4% annualised growth in April.
Meanwhile, average earnings will also be closely watched, as wage growth finally starts to outpace inflation, although economists do not expect any major changes this month.
Excluding bonuses, wage growth is forecast to remain unchanged at 2.9% on a three-month annualised basis, though, including the bonus measure a tick down to 2.5% growth is forecast.
Employment growth is forecast to slow following last month’s very strong 197,000, while the annual unemployment rate is expected to remain at 4.2% for a third consecutive month.
Significant announcements expected:
Monday June 11:
Finals: IG Design Group PLC (LON:IGR), Palace Capital Plc (LON:PCA)
AGMs: Coca-Cola HBC PLC (LON:CCH)
Economic data: UK industrial, manufacturing production; UK construction output; UK balance of trade
Tuesday June 12:
Trading updates: Bellway PLC (LON:BWY), British American Tobacco plc (LON:BATS), Boohoo.com PLC (LON:BOO), Ted Baker PLC (LON:TED), Trifast PLC (LON:TRI)
Interims: Crest Nicholson PLC (LON:CRST), Iomart Group PLC (LON:IOM), Pressure Technologies Plc (LON:PRES)
Finals: BP Marsh & Partners PLC (LON:BPM), CML Microsystems PLC (LON:CML), Civitas Social Housing PLC (LON:CSH), Halma PLC (LON:HLMA), Motorpoint Group PLC (LON:MOTR), Oxford Instruments PLC (LON:OXIG), Park Group PLC (LON:PKG)
AGMs: Kingfisher PLC (LON:KGF)
Economic data: UK labour market data; US FOMC meeting begins; US CPI inflation
Wednesday June 13:
Finals: Biffa PLC (LON:BIFF), Charles Stanley Group PLC (LON:CAY), Castings PLC (LON:CGS), Eckoh PLC (LON:ECK), Evgen Pharma PLC (LON:EVG), Enteq Upstream plc (LON:NTQ), Mulberry Group PLC (LON:MUL), Norcros PLC (LON:NXR)
Interims: Autins Group PLC (LON:AUTG), Redhall Group PLC (LON:RHL)
Economic data: UK CPI, RPI, PPI, HPI inflation; US forward PPI, US FOMC interest rate decision
Thursday June 14:
Trading update: PZ Cussons PLC (LON:PZC), N Brown Group PLC (LON:BWNG)
Finals: Aveva Group PLC (LON:AVV), Majestic Wine PLC (LON:WINE), Consort Medical PLC (LON:CSRT), Mountview Estates PLC (LON:MTVW), Syncona Limited (LON:SYNC)
Interims: Care Tech Holding PLC (LON:CTH), Safestore Holdings PLC (LON:SAFE)
AGMs: Wm Morrison Supermarkets PLC (LON:MRW), International Airlines Group PLC (LON:IAG),
Ex-dividends to knock 4.5 points off FTSE 100 index - 3i Group PLC (LON:III), Mediclinic International Plc (LON:MDC), NMC Healthcare PLC (LON:NMC), Persimmon PLC (LON:PSN), Severn Trent PLC (LON:SVT), WPP PLC (LON:WPP)
Economic data: UK retail sales; US weekly jobless claims; US retail sales; US import and export prices
Friday June 15:
Trading update: Tesco PLC (AGM Q1) (LON:TSCO), SThree PLC (LON:STHR)
Finals: Record PLC (LON:REC), Wynnstay Properties PLC (LON:WSP)
Economic data: UK trade in goods; US industrial production; US Empire State manufacturing survey; US University of Michigan consumer sentiment reading