The post-Christmas deluge of trading updates will continue on Wednesday, with several well-known high street brands to report alongside ‘big four’ supermarket Sainsbury’s.
There will also be an appearance from housebuilder Taylor Wimpey as investors brace for any potential impact from what seems to be a shift in the UK housing market.
Argos and clothing could weigh on Sainsbury’s
For Sainsbury’s, which is looking to complete a £12bn merger with Wal-Mart Inc (NYSE:WMT) owned Asda, UBS's analysts are looking for a generally “robust” performance with its update on Wednesday, although they are concerned that weaker consumer confidence will hit sales in its clothing and general merchandise divisions.
The analysts said: “Market share should be robust across the store, but discretionary categories are likely to be impacted by weak consumer confidence. We model Retail like-for-like +0.3% (2Q19: +1.0%, 3Q18: +1.1%).”
“That said, Argos has been winning share in key categories and, with >250 shop-in-shops now open in Sainsbury’s, it should be a convenient choice for Christmas present buying. We expect GM total sales -0.5% (2Q19: +1.2%; 3Q18: -1.4%).”
Grocery momentum has improved of late, though, with recent Kantar data pegging Sainsbury’s as the fastest-growing ‘Big Four’ grocer.
Ted Baker needs a hug
The company’s chief executive and founder Ray Kelvin has taken a voluntary leave of absence while sexual harassment claims against him are investigated. He is accused of forcing hugs and kisses on employees but has denied the claims.
Chief operating officer and chief financial officer, Lindsay Page, is leading the company until the probe has been completed.
The group is also dealing with the impact of a tough retail market and troubles at concession partner House of Fraser.
In the first half, the group’s profits fell 3.2% to £24.5mln after taking a one-off £0.6mln hit from debts owed by House of Fraser, which is closing down stores after being rescued by Sports Direct last August.
The fashion retailer still achieved 3.5% increase in revenue to £306.0mln for the period but warned that the rest of the year would be “challenging” given the struggles on the high street.
Ted Baker will publish its Christmas trading update for the five weeks to January 5 on Wednesday and investors will be hoping the group managed to deliver further sales growth despite its challenges.
Majestic Wines hoping to toast better new year
The AIM 100 wine seller will also be looking for some better news after a weak set of first-half results that saw it swing to a loss as a weak UK market bit into its earnings.
The firm reported a pre-tax loss for the period of £0.2mln, down from a £3.1mln profit last year despite revenues climbing 5.4% to £229.1mln.
While Majestic did add that it was aiming to invest an additional £9mln-£12mln in the 2019 financial year in its online Naked Wines business aimed at driving more growth, the company forecast flat pre-tax earnings for the full year in its outlook so investors will be looking for anything that could indicate signs of growth in the short term.
Topps Tiles likely to update on Brexit inventories in update
Another victim of the high street's struggle this year, Topps Tiles Plc (LON:TPT), will release its Xmas trading update on Wednesday, with investors likely on the lookout for any turnaround following a drop in full-year profits in its results in November.
Any updates on potential Brexit-related disruption will also likely make an appearance as the deadline for Britain’s exit looms closer with little sign of a deal.
The group said at the time that it would increase the inventory of its important products to protect against supply chain disruptions from Britain's exit from the European Union, so any deviations from this will be closely watched.
Uncertainty to impact demand for Taylor Wimpey
Away from the retailers, the UK’s second-largest housebuilder Taylor Wimpey PLC (LON:TW.) will issue a trading update on Wednesday having warned in November that it was seeing “some signs of customer caution” in the property market.
The FTSE 100 company said on 13 November 2013 that it had £2.4bn worth of orders in the pipeline, some 9% more than it had this time last year and at the upper end of management’s expectations.
But despite these “solid” forward sales indicators, Taylor Wimpey said the current “heightened political and economic uncertainty” means it has seen a drop-off in demand, particularly in the south east of England.
At the start of December, analysts at UBS slashed their target price for Taylor Wimpey shares by 11% to 190p, down from 213p, in a cautious note on the sector.
The Swiss bank’s analysts said that housebuilder stocks are likely to remain volatile until there is any real breakthrough with Brexit.
Significant announcements expected:
Wednesday January 9:
Trading update: J Sainsbury plc (Q3) (LON:SBRY), Taylor Wimpey PLC (LON:TW.), Ted Baker PLC (LON:TED), Topps Tiles Plc (LON:TPT), Majestic Wine PLC (LON:WIN), Greggs plc (LON:GRG), B&M European Value Retail SA (LON:BME)
Economic data: UK productivity data