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Jack’s store roll-out in focus as Tesco reports first half results

Last updated: 06:02 01 Oct 2018 BST, First published: 12:02 28 Sep 2018 BST

Tesco

Tesco PLC (LON:TSCO) takes centre stage in the week ahead’s corporate calendar as the supermarket reports its first-half results on Wednesday.

The supermarket group’s shares hit all-time highs in August, reflecting the confidence felt by investors and shared by the management, which has now notched up ten consecutive of sales growth.

Recent agreements have hinted at the optimism, too: the ink on the Booker deal had barely dried when the UK’s largest supermarket chain announced a supply alliance with Carrefour.

CEO Dave Lewis will tell you the job is certainly not done, though. The Carrefour tie-up, designed to give both parties more buying power, was a nod to margin pressures.

Aldi and Lidl have forced the likes of Tesco and the other ‘Big Four’ supermarkets to trim their prices while input costs have been rising at the same time.

In response to those pesky discounters, Tesco recently opened its first Jack’s store. The City will be on the lookout for more detail on the plans for the initial roll-out and beyond in Wednesday’s interim results.

Has trading picked up at DFS?

DFS Furniture Plc (LON:DFS) will post its full-year results on Thursday and investors already have a pretty good idea of what’s coming.

In July, the sofas and dining tables retailer pushed out a profit warning, blaming the heatwave and supply issues.

Guidance was hardly cheerful either, with DFS telling investors that it expected the furniture retail market to “remain challenging” for at least the next year.

Investors will want to hear more on this, has the start to the new year been as slow as feared? Or has there been a pick-up in trading?

The company has often said that it uses difficult trading conditions to build market share and it has looked to do just that with the acquisition of Sofology and Sofa Workshop. Keep an eye out for how these new additions are performing.

US construction market to drive Ferguson sales higher

Three-quarters of Ferguson Plc’s (LON:FERG) revenue comes from the US, where the construction market has been booming in recent years.

That growth has been reflected in the building materials group’s share price which recently hit levels not seen for almost a decade.

Various reports have shown that the momentum in the US construction sector has slowed of late, although new builds remain near their highest levels since the financial crisis.

Analysts reckon Tuesday’s full-year results will show continued progress in sales, while the market will also be looking for those extra sales to deliver margin improvements as costs are kept in check.

In the past, Ferguson has made small, bolt-on deals to help grow the business, and it has previously said that the pipeline of acquisitions remains strong.

Some in the City reckon a bigger deal could be on the cards in the not-too-distant future though, pointing to the low level of net debt despite having made additional payments to shareholders.

Slowdown expected at Electrocomponents

UBS analyst Rory McKenzie is expecting to see a ‘slight slowdown’ as Electrocomponents Plc (LON:ECM) gives the market a trading update on Thursday.

The first quarter delivered 10% growth for the group, as McKenzie highlighted, and the analyst expects the sUBSequent period to achieve ‘high-single-digit growth’ but he reckons it will somewhat be due to the tougher year-on-year comparatives.

Some slowing in the electronics cycle will also be a factor, he added.

“We also expect a comment on overall outlook vs. consensus expectations.

“We (and consensus) forecast +8% organic growth for FY’19e overall, so some slowdown is already well-reflected in forecasts.”

The UBS man added: “Electrocomponents guides for flat gross margins in FY’19e, but we note that timing of supplier rebates may see H1 gross margins be up y/y and H2e down y/y.”

In terms of forecasting, McKenzie noted that overall market consensus currently sees full-year pre-tax profit at £209mln, while the Swiss Bank anticipated £210mln. And, the analyst does not expect changes to forecasting at this point in the year.

All eyes on US non-farm payrolls

The US Labor Department’s September non-farm payrolls report will be the main event on the economic data front.

Analysts expect the data to show US employers added 185,000 jobs in September following a 201,000 rise a month earlier.

The unemployment rate is forecast to edge down 0.1 percentage point from the 3.9% reported in August.

The Federal Reserve takes into account the health of the labour market in deciding monetary policy so a strong jobs report could raise expectations for the next interest rate hike.

Significant announcements expected week ending October 5:

Monday, October 1

AGMs: Vedanta Resources PLC (LON:VED), Kromek Group PLC (LON:KMK)

Economic data: UK manufacturing PMI; US ISM manufacturing index; US construction spending; US manufacturing PMI

 

Tuesday, October 2:

Finals: Ferguson Plc (LON:FERG), Avacta Group Plc (LON:AVCT), Revolution Bars PLC (LON:RBG), SCS Group PLC (LON:SCS)

Interims: Inspiration Healthcare Group PLC

Traffic figures: Wizz Air PLC (LON:WIZZ)

Economic data: UK construction PMI; Fed chair Jerome Powell speech

 

Wednesday, October 3:

Interims: Tesco PLC (LON:TSCO)

Finals: Avingtrans PLC (LON:AVG)

Traffic figures: International Airlines Group PLC (LON:IAG)

Economic data: UK services PMI; US ADP employment report; US ISM non-manufacturing index; US services PMI

 

Thursday, October 4:

Trading update: Electrocomponents PLC (LON:ECM)

Finals: DFS Furniture Plc (LON:DFS)

Interims: e-Therapeutics PLC (LON:ETX), Morses Club Plc (LON:MCL)

Traffic figures: easyJet PLC (LON:EZJ)

Ex-dividends: British American Tobacco plc (LON:BATS), British Land PLC (LON:BLND), Intertek Group PLC (LON:ITRK), Smith & Nephew PLC (LON:SN.), Travis Perkins PLC (LON:TPK), Taylor Wimpey PLC (LON:TW.), WPP PLC (LON:WPP)

Economic data: US weekly jobless claims; US Challenger job cuts; US factory orders

 

Friday, October 5:

Economic data: US non-farm payrolls; US international trade; US consumer credit

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