The coming week is a little quieter (and shorter) than usual as Easter approaches, however, the calendar still has some key firms reporting results as industries continue to grapple with the ongoing fallout of the pandemic on their businesses.
Both Britain’s biggest grocer Tesco and online clothing behemoth ASOS are scheduled to report figures, although their outlook for the coming months is likely to attract the most attention.
Meanwhile, a bundle of macro data is likely to make for painful reading, with the UK due to deliver production and monthly GDP figures.
The US is expected to release more jobless claims figures, which recently have seen some eye-popping numbers and could see the picture worsen for the American economy.
HomeServe hopes emergency repairs will keep investors sweet
Apart from ex-customers getting regular unsolicited post pleading for them to come back, we have heard nothing from Homeserve Plc (LON:HSV) about how it’s doing since mid-November. However, that will change on Tuesday when it delivers a trading update.
The FTSE 250 company, which offers home emergency, repairs and heating services, is allowed to remain open for business as it provides essential services – although it is prioritising emergency cases at the moment, with technicians wearing protective gear when visiting customers’ homes.
There is still likely to be some disruption to the business from the coronavirus pandemic and the government lockdown, even though it will still be expected to maintain a level of revenues.
The type of services offered by HomeServe maybe means its income “is more reliable than other businesses”, said analysts at Hargreaves Lansdown.
“To some extent investors will be hoping not much has changed in next week’s full year trading statement."
The US business is the main growth story for HomeServe, and makes up more than a third of sales, but may be derailed somewhat by virus developments.
Tesco checks its receipts
The grocer has been one of the few companies seeing improvement amid the coronavirus crisis, as consumers have been stocking up their cupboards and given up on dinners out.
Analysts at AJ Bell said that the panic buying gave Tesco some respite from the war with Aldi and Lidl, while its share price has “only” dropped 16% in the past month, against the wider FTSE 100 index tanking 28%.
Analysts also pointed out that the acquisition of wholesaler Booker in 2017 is helping sales and earnings momentum at the group.
Investors will want to see whether the firm is on track to meet the goals of generating synergies of £140mln by January 2020 and £210mln by next year.
What’s more, its Thai and Malaysian operations are going to be sold for £8bn, helping to erase the pension deficit and fund a £5bn special dividend - amounting to 51p per share.
In the results, the market will be interested in like-for-like sales growth, which have been pressured by discounters.
However, pre-tax profit is expected to rise to £1.9bn against last year’s £1.5bn, while dividend should come in at 8.27p per share up from 5.77p a year ago.
When it comes to forecasts, consensus full-year pre-tax profit its now £2.3bn for a 10% increase in the ordinary dividend to 9.13p per share.
ASOS faces pressure from workers as interims arrive
Online clothing giant ASOS PLC (LON:ASC) has come under pressure in recent weeks after the GMB workers union accused the firm of unsafe practices in its warehouses by not enforcing social distancing rules.
While the company is due to deliver its interims on Wednesday, investors will be more worried about whether the pressure will cause the company to temporarily shut down its online store following a similar move from Next after it too got into a dispute with staff.
Even if ASOS does not follow suit, it may begin to show signs of demand for its clothes slowing as quarantined customer forgo new clothes and instead reign in spending just for the essentials.
There could also be issues with the firm’s supply chains as the outbreak disrupts shipping lanes and air freight.
Without any knowledge of how long the disruption will last, the focus is likely to be on the core business, particularly the company’s profit margins which have been thin of late and are vulnerable to sales declines.
Attention will also be drawn to any cost saving measures the company has put in place to combat the effects of the pandemic, as well as any improvements in the company’s cash flow.
However, ASOS will be one of few firms that will not be cancelling its dividend, given that it does not pay one in the first place.
Analysts at UBS are expecting 18% growth in retail sales alongside a 95 basis point decline in gross margins, giving it a pre-tax profit of £14.2mln.
While they do not expect the pandemic to affect the figures, UBS said attention will focus on the impact of coronavirus on third quarter sales so far as well as any contingency plans and cash conservation measures.
“Looking at the economic indicators nowadays is like watching a horror movie,” says Marshall Gittler at BDSwiss and, after looking at the potential shape of the economic recovery in coming years from V-shaped, to U- and L-shaped but reckoning a “Nike swoosh” is more likely, says for next week’s economic data “who cares?” when it’s all so transitory and backwards looking anyway.
But for the UK, the big day is Maundy Thursday’s short-term economic indicator day, when the Office for National Statistic will publish figures on GDP, industrial production and trade.
UK industrial production is forecast to show a small improvement in February, declining only 2.6% year on year instead of 2.9%.
After January’s paltry 0% month-on-month performance for GDP, February is expected to have just eked out 0.1% expansion but that was before the sharper effects of the pandemic and government lockdown kicked in.
The weak GDP at the start of the year was probably due to concerns over Brexit.
“Ha! How quaint and innocent those concerns seem now,” says Gittler. “There was talk of shortages of critical medicines, but no one dreamed that they’d be converting a London conference center into an emergency hospital, as has actually happened.”
After the past week’s weak PMI data, Pantheon Macroeconomics said this was consistent with GDP falling by a further 2.5% in the second quarter of 2020, but as the retail sector is not included in the PMIs, it was forecasting much bigger declines in GDP of about 1.5% in Q1 and 13.0% in Q2.
US data will be closely examined by many market operators, including the Job Openings and Labor Turnover Survey (JOLTS) and NFIB Smaller Business Economics Trends report.
The NFIB has maintained a run of scores above 100 since 2016 but the market it is braced for bad news, as with the JOLTS where January saw 6.9mln job openings, the sixth year-on-year decline in seven months.
This suggested the US economy had been cooling a bit, even before the viral outbreak hit home, say analysts at AJ Bell.
“A further decline seems possible this time around although it may not be until the March and April figures that we get to see an extended of the slowdown.”
Significant announcements expected for week ending 10 April:
Monday 6 April:
Tuesday 7 April:
Wednesday 8 April:
Trading announcements: Hyve Group PLC (LON:HYVE)
Economic data: US Fed minutes
Thursday 9 April:
Finals: Puretech Health PLC (LON:PRTC),
Economic data: UK trade balance, UK production, UK monthly GDP, US jobless claims, US PPI
Friday 10 April:
Economic data: US inflation