Retail results to vie with 'Meaningful' Brexit vote, UK, US rate decisions, and key data

DIY stores owner Kingfisher, clothing retailer Next, plus troubled fashion firm Ted Baker will report full-year results, with trading updates due from internet grocer Ocado and online fashion group ASOS

B&Q store
The past year has been challenging for B&Q and Castorama home improvements retailer Kingfisher

As the market waits for the third, ‘Meaningful’ parliamentary vote on Brexit in the coming week, investors will have a number of other factors to divert them including UK and US rate decisions, the latest UK inflation, jobs and retail sales numbers, and some corporate news from the high street.

FTSE 100-listed B&Q DIY stores owner Kingfisher PLC (LON:KGF) and clothing and homewares retailer Next PLC (LON:NXT), plus troubled mid-cap fashion firm Ted Baker PLC (LON:TED) will all report full-year results, while internet grocer Ocado PLC (LON:OCDO) – which is morphing into a tech company – and AIM-listed online fashion group ASOS plc (LON:ASC) will issue trading updates.

Kingfisher restructuring progress in focus

The past year has been challenging for home improvement retailer Kingfisher which reports its annual results on Wednesday.

The company, which owns B&Q and Screwfix in the UK and Castorama and Brico Depot in France, is now in the third year of its transformation plan, called “One Kingfisher”, which involves unifying its products sold to simplify the business.

But the restructuring has been undermined by a difficult UK retail market and civil unrest in France, among other pressures.

“This has been a tough year for the group, with UK macro unhelpful, the France GDP recovery fading and the impact of social unrest, plus the fact that ONE Kingfisher supply chain gains seem to be flowing more slowly than expected,” UBS said.

Noting also that: “A number of senior members of the management team have also departed.”

The Swiss bank added: “Looking ahead, key issues will be whether transformation plan guidance remains intact, whether the Castorama like-for-like sales decline is abating, and whether the eventual exhaustion of the guided transformation and exceptional costs will eventually see an increase in underlying operational expenditure and thus further pressure on margin.”

What’s next for Next?

Ahead of its annual results on Thursday, Next cut its profit guidance due to weaker margins and operational costs.

The fashion retailer expects full-year profit of £723mln for the 2019 financial year, down from a previous forecast of £727mln, despite defying a high street downturn to deliver a 1.5% increase in total full price sales over the Christmas period.

For 2020, the company estimates profit will fall to £715mln in 2020 and sales will rise 1.7%.

UBS said the 1% decline in 2020 profits reflects ongoing channel shift pressures on cost ratios.

The investment bank added: “At this early stage in the year, and with Brexit-related uncertainties persisting, we would be surprised to see any change in guidance.”

Divi could be cut by Ted Baker after profit warning

Ted Baker also reports its full-year results on Thursday in the wake of the resignation of its chief executive and a profit warning.

Founder Ray Kelvin stepped down as chief executive of the fashion firm earlier this month after taking a voluntary leave of absence following allegations he harassed staff with “forced hugs” and ear kissing.

The harassment claims are likely to outshine annual results from Ted Baker, which warned in February that profits would be lower than expected due to stock write-downs, foreign exchange and additional product costs.

Profit before tax is expected to be in the region of £63mln, but this is before another raft of one-off charges related to an independent investigation into Kelvin’s conduct, House of Fraser bad debts and the acquisition of No Ordinary Shoes.

“Despite increasing competition, we think sales will still be moving in the right direction,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

“The question will be if that’s coming at the expense of profitability. Discounting means margins could be under pressure, and it’s important these aren’t pushed too far. They currently stand at around 13%.”

The analyst said there is also a chance the dividend could be reduced.

The company has a strong track record of shareholder returns but its policy of paying out about half of their earnings means February’s profit warning could impact the dividend, Lund-Yates said.

Fire impact eyed at Ocado

What a few months it has been for Ocado, which is due to update the markets on its first quarter on Tuesday.

The online grocer has had to deal with a massive blaze at its Andover warehouse and we already know there will be an impact on sales: the question is, how much of an impact?

Marks and Spencer Group PLC (LON:MKS) obviously wasn’t too put off as it struck a massive deal with Ocado that will see it replace Waitrose as Ocado’s food supplier from next year.

M&S has paid a hefty price – £750mln to be precise – to get into bed with Ocado, which analysts think got the better end of the deal.

How the company plans to use that cash will no doubt be of interest as well.

It’s likely that chief executive Tim Steiner will pour the money into the other side of Ocado’s business – the side that licences out its online delivery technology to retailers and which is seen by most as the key to future success.

Given it’s a trading statement, we can’t expect a huge amount of detail on potential new deals, but we may get a glimpse of where third-party interest levels are.

Could ASOS upgrade its recently downgraded guidance?

Investors in ASOS are already braced for a fall in margins when the online fashion retail giant updates on trading on Tuesday.

The company, one of the biggest on AIM, shocked the market in December when it issued profit warning following a “significant deterioration” in November trading, which analysts believed was down to a cock-up in its Black Friday strategy.

Shares plunged on the news and although they’ve recovered somewhat since they are still down almost 40% from their December highs.

Earlier this year, Peel Hunt said the warning was more a “trading misstep” and claimed that ASOS could even raise its guidance in the upcoming update. Investors would love that to be the case.

US sales will also be of interest as well given the growth potential over on that side of the Atlantic, while the warm February might have dented average basket values (ABVs).

Copper miner Antofagasta looks to break records

Away from the retail sector, FTSE 100-listed miner Antofagasta PLC (LON:ANTO) will be looking to deliver on its bullish January update with its finals on Tuesday after reporting a strong rise in copper production to record levels and forecasting another record year for 2019.

The Chile-based group said its fourth-quarter copper production rose 16.8% to a record 220,000 tonnes as a result of higher production at all operations, adding that its production in the full year had been at the top-end of revised guidance, up 3% to 725,300 tonnes due to higher production at its Los Pelambres and Centinela projects.

It is also estimating 750,000-790,000 tonnes of copper, 240,000-260,000 ounces of gold, and 11,500-12,500 tonnes of molybdenum for 2019.

In a note on 12 March, analysts at Canadian bank RBC Capital said they are expecting the upcoming results to be “potentially slightly ahead of consensus estimates”.

More details on Smith’s separation of medical division

Blue chip engineer Smiths Group PLC (LON:SMIN) has seen its share price drop over the past six months or so, largely on regulatory changes and contract losses at its medical division.

That arm of the business, which makes tracheostomy tubes and heart rate monitors, will no doubt be in focus once again, especially as management said in November that they would either sell or spin it off into a separate listing.

Back then, Smiths said it would provide more details in Friday’s interim results.

The group’s other divisions have performed much better. Global security worries, exacerbated by events such as last week’s terror attack in New Zealand, will no doubt help the detection business, which provides the scanners used at Heathrow.

Flex-Tek's exposure to the US construction market should bring positive results, although weak oil prices could hit trading and new orders in the oil services division.

Orders key for Wood Group after FTSE 100 relegation

Investors in oil services firm John Wood Group PLC (LON:WG.) will be looking for some more additions to its US$10bn order book when it reports its final results on Tuesday.

The company will also try to deliver some silver linings as it is due to be booted from the FTSE 100 from Monday following the latest quarterly reshuffle.

Analysts at The Share Centre are hoping that integration costs from its takeover of AMEC Foster Wheeler, which dented the company’s profits in the first half, “will not be repeated” and instead expect to see synergies coming through.

Aramco update and cash news eyed from Lamprell

In a pre-close trading update in January, Lamprell PLC (LON:LAM) said its full-year performance would be in line with forecasts, with a year-end cash balance of around US$80mln, so investors may be looking for how the oil rig builder intends to spend its new money when it reports its finals on Thursday.

There will also be expectations of an update on the Long-Term Agreement (LTA) programme with oil giant Saudi Aramco after the company said it expected opportunities under the US$27.5bn programme to “materialise in 2019 and beyond”.

Fed to keep rates on hold

On the macro front, given recent disappointing US jobs data, worries over the impact of the US/China trade battle, January’s governmental shut-down, and slowing global growth, the US Federal Reserve is unlikely to be making any changes to its monetary policy on Wednesday following the latest FOMC meeting.

The Fed released a statement in January that suggested it was no longer sure if it would continue raising borrowing costs, after hiking rates four times in 2018.

And in a speech on March 9, Fed chairman Jerome Powell said: “With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the committee has adopted a patient, wait-and-see approach.”

The Fed meeting also comes in the wake of the European central bank’s surprise move earlier this month to change tack on its tightening plan by pushing out the timing of its first post-crisis rate hike until 2020 at the earliest and offering banks a new round of cheap loans to help revive the euro-zone economy.

UK rate hike inconceivable

Similarly, with Brexit uncertainties at a peak, it is inconceivable that there will be an outcome other than a unanimous 9-0 vote from the Bank of England Monetary Policy Committee (MPC) to keep UK interest rates on hold on Thursday.

The sharp slowdown in the economy in the fourth quarter of 2018 and weak activity overall in the first quarter - amid heightened Brexit uncertainties and a weakened global economic environment - has diluted the case for any near-term increase in interest rates, according to Howard Archer, chief economic advisor to the EY ITEM Club.

In a preview of the MPC decision, he said: “We believe that it is ever more likely that the Bank of England will hold interest rates throughout 2019 - assuming the UK ultimately leaves the EU with a ‘deal’.

“If there is a UK exit from the EU with a ‘deal’ by the end of the second quarter, it is possible that the Bank of England could raise interest rates from 0.75% to 1.00% in November if the economy is showing improvement helped by reduced uncertainty. Even if this is the case though, the MPC may prefer to hold off acting for longer until there is sustained evidence of stronger UK economic activity.”

'Meaningful Vote 3': Slasher or thriller?

Rather like the third iteration of a disappointing film trilogy, many may well be questioning why Theresa May is attempting what is being dubbed 'Meaningful Vote 3' on Tuesday, according to economists at ING.

After all, they pointed out, May's deal was defeated by 149 votes in a second attempt to pass it last Wednesday evening, one of the largest government defeats on record.

What's more, the EU has made it pretty clear that the UK has extracted all the reassurances it is going to get on the contentious Irish backstop.

The economists said: “There is a lot of focus on the UK Attorney General Geoffrey Cox, who is reportedly in talks with the Democratic Unionist Party (DUP) to see how he can change his legal advice on the Irish backstop.”

But, they added: “On the basis that the Attorney General doesn't manage (to) pull a rabbit out of the hat, in the end it will come down to politics. Whether or not May's deal succeeds will depend on a) whether the Brexiteers think there is a real chance of a long Brexit delay and b) whether they think Parliament is likely to rally around a softer Brexit alternative.”

UK jobs, inflation, retail sales to battle Brexit

Although the domestic focus will continue to be on the ongoing Brexit shenanigans, the coming week will also bring some big UK economic data to contend with.

Tuesday will see the latest UK jobs data released and with the unemployment rate currently at historic lows any uptick in the rate of unemployment will no doubt have a Brexit focus

The main interest though will be on wage growth which is still coming through slowly, with the previous month’s average weekly earnings rise at 3.4%, albeit well above inflation.

The latest consumer price index numbers will be posted on Wednesday, having dropped below the Bank of England’s 2% target rate in January, helped along by lower oil prices.

Should inflation hold below 2% again in February or even drop lower, then it will make the Bank of England’s interest rate decision on Thursday even easier, not that any rise in interest rates from the current level of 0.75% is expected anyway.

Thursday’s retail sales data for February will also be closely eyed, with January’s figures having benefitted from big discounts on clothing after the Christmas period

The view amongst many though remains that the consumer is holding off on big-ticket items amidst the political and economic uncertainty over Brexit and that may show up in the latest retail sales figures.

Significant announcements expected for week ending March 22

Monday March 18:

Finals: S4 Capital PLC (LON:SFOR), Gama Aviation PLC (LON:GMAA), Maintel Holdings plc (LON:MAI), Miton Group PLC (LON:MGR), Restore Plc (LON:RST)

Interims: Volution Group PLC (LON:FAN)

Economic data: US NAHB housing market index

Tuesday March 19:

Trading update: ASOS plc (LON:ASC), Ocado PLC (LON:OCDO)

Finals: Antofagasta PLC (LON:ANTO), John Wood Group PLC (LON:WG.), Mears Group PLC (LON:MERG), TP ICAP PLC (LON:TCAP), Bango PLC (LON:BGO), ECSC Group PLC (LON:ECSC), Learning Technology Group PLC (LON:LTG), Taptica International Limited (LON:TAP), Applegreen PLC (LON:APGN), Elcosoft PLC (LON:RLCO), Judges Scientific PLC (LON:JDG), JPJ Group PLC (LON:JPJ), Kape Technologies PLC (LON:KAPE), Mortgage Advice Bureau Holdings PLC (LON:MAB1), NAHL Group plc (LON:NAH), Ocean Outdoor Limited (LON:OOUT), Team17 Group PLC (LON:TM17), Zotefoams Plc (LON:ZTF)

Interims: SCS Group PLC (LON:SCS), Softcat PLC (LON:SCT)

Economic data: UK labour market data; US housing starts; US building permits

Wednesday March 20:

US Fed interest rate decision

Finals: Kingfisher PLC (LON:KGF), Eland Oil & Gas PLC (LON:ELA), Centaur Media PLC (LON:CAU), Curtis Banks Group PLC (LON:CBP), Cloudbuy PLC (LON:CBUY), EMIS Group PLC (LON:EMIS), Empiric Student Property PLC (LON:ESP), Frontier Smart Technologies Group Limited (LON:FST), Genel Energy PLC (LON:GENL), SDL Plc (LON:SDL), Science in Sport PLC (LON:SIS), Ten Entertainment Group PLC (LON:TEG), TI Fluid Systems PLC (LON:TIFS)

Interims: Kier Group PLC (LON:KIE)

Economic data: UK CPI, RPI, PPI inflation data; UK house price index; UK CBI monthly industrial trends survey; US MBA mortgage applications

Thursday March 21:

UK Bank of England rate decision

Finals: Next PLC (LON:NXT), Ted Baker PLC (LON:TED), Lamprell PLC (LON:LAM), Enquest PLC (LON:ENQ), Cello Health plc (LON:CLL), LoopUp Group PLC (LON:LOOP), Portmeirion Group PLC (LON:PMP), Integrated Diagnostics Holdings PLC (LON:IDHC),  Sopheon PLC (LON:SPO), Sportech plc (LON:SPO), Venture Life PLC (LON:VLG)

Interims: Xaar PLC (LON:XAR), Spitfire Oil Ltd (LON:SRO)

Trading update: MITIE Group PLC (LON:MTO), IG Group Holdings PLC (LON:IGG)

Ex-dividends to knock 7.5 points off FTSE 100 index: British American Tobacco plc (LON:BATS), Phoenix Group PLC (LON:PHNX), Royal Bank of Scotland PLC (LON:RBS), Segro PLC (LON:SGRO)

Economic data: UK retail sales; UK public sector finances; US weekly jobless claims; US Philly Fed manufacturing index

Friday March 22:

Interims: Smiths Group PLC (LON:SMIN)

Finals: Sanne Group PLC (LON:SNN)

Economic data: US existing home sales

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