Reports from a struggling fashion brand and a café-bar chain firm could excite investors on a busy Wednesday, with a possible FTSE reshuffle and some economic data also in the works.
The café-bar operator floated in April at 200p and the shares had recently sunk to 188.5p, before perking up in the past week as some investors are clearly optimistic about the coming numbers.
October's trading update showed revenue and like-for-like (LFL) sales 22% and 5% respectively higher than 2018, and said plans to add 25 sites over the financial year to its 154 existing Lounges and Cosy Clubs were on track, as 10 had opened in the six months to 6 October.
Broker Peel Hunt felt trading was “strong” during the first half, but margins are expected to stay flat with minimal growth thereafter due to slowing LFL sales, expected to grow 2.7%.
“Loungers is materially outperforming the sector in relation to sales, but without resorting to discounting and delivery,” analysts said in a recent note.
“It's strong, self-financed growth is being supported by its PLC status, enabling wider share ownership in the company and an even stronger landlord covenant. In our view, these attractions are yet be reflected in the share price.”
Questions to answer at Quiz
Investors will be keeping an eye on the £2mln to £3mln cost-cutting programme that Quiz instigated in October to offset the demise of in-store sales, with the focus to be switched to the online business.
The move came as no surprise to shareholders, after a disastrous year in which the fast-fashion retailer scrapped its final dividend and halved the value of its shares.
This all stemmed from the collapse of high street department store House of Fraser, coupled with more aggressive discounting, which managed to wipe out 97% of its profits.
Since then, business has picked up slowly, but sales were still down 5% at £63.3mln in the first half of the year, slumping 11% at the UK standalone stores.
However, online operations fared better with 7% growth to £20mln in revenue.
In October, broker Peel Hunt said at the time “this isn't Quiz's finest hour”, and recommended the stock as a ‘sell’, but noted that a better gross margin meant that management might be able to protect profits.
Easyjet and Hiscox in FTSE 100 tussle
Wednesday could be a dramatic day for London’s blue-chip index, with the results due of the latest three-month FTSE indices review determining who stays and who goes.
Usually, stocks will be promoted into the FTSE 100 if they rise to 90th highest market cap or above, and stocks are demoted if they fall below 111th.
“easyJet has had a serious return to form since its relegation, having added 57% since a low point of 855p in the early part of June,” he explained, adding that recent strike action at British Airways and Ryanair has “actually played into easyJet’s hand in the last few months”.
“Hiscox, on the other hand, will almost certainly move the other way after its promotion to the FTSE 100 last December," Hunter noted.
The insurer’s shares have plunged 26% from a July peak of 1777p, “having been blighted by some catastrophic weather events, such as the Japanese typhoon, leading to a hit of some $165 million, an increase in claims emanating from the US and widespread doubts over whether its premium valuation was justified.”
“Currently teetering – but safe for the moment – in 97th, 98th and 100th places are William Morrison Supermarkets, Sainsbury’s and Centrica respectively,” he added.
It's the economy, stupid
Elsewhere, the UK services purchasing managers' index (PMI) will be watched for signs about the state of the UK economy as the election and Brexit approach.
Manufacturing PMIs came out in slightly less dire than expected on Monday, and services figures are expected to follow suit with a flat reading of 48.6.
There will also be another batch of data from across the Atlantic with US non-manufacturing and services PMIs.
Significant announcements expected for Wednesday 4 December:
Economic data: UK Services PMI, UK Composite PMI, US Services PMI, US Composite PMI, US Non-Manufacturing PMI, US ADP employment rate