03/10/2022

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Tesco PLC, Marks and Spencer, Whitbread and ASOS set to report as 2022 calendar gets into gear

10 min read

Retailers including Sainsbury’s and Boohoo, consumer favourites likes Games Workshop and housebuilders Persimmon and Taylor Wimpey are among those reporting as the 2022 financial calendar gets busy

After the festive holiday break, retailers of all stripes are queueing to inform investors in the coming week how this key period went for them, with Tesco, Marks & Spencer, JD Sports, ASOS among them.

Other sector themes to look out for include updates from a handful of housebuilders, including Persimmon and Vistry; insights into travel trends via Premier Inn owner Whitbread, into omicron-related stay-at-home delivery habits from Just Eat, and into the much-mentioned staffing shortages seen in the second half last year via a pair of recruiters.

Tuesday 11 January

Santa’s Workshop?

Following a quiet Monday in the diary, Tuesday is slightly busier, with Games Workshop Group PLC (LSE:GAW) another company that can offer insights into how some consumer habits are enduring amid the pandemic’s current wave.

The FTSE 100-listed tabletop gaming outfit has already said that half-year sales will be not less than £190mln and profit before tax at least £86mln.

Given capacity constraints, higher freight costs, supply chain disruption and impact from restrictions such as in Australia, investors will be hoping to hear that management are confident of a much stronger performance in the second half as £500mln of investment is pumped into manufacturing and logistics.

With some major launches coming up in coming months, broker Peel Hunt said this could provide a further boost.

Staffing insights

Amid much talked about staff shortages in many sectors of the UK economy, this should provide a good backdrop for recruitment firms Robert Walters (LSE:RWA) PLC and PageGroup (LSE:PAGE) PLC to give fourth-quarter updates on Tuesday and Wednesday respectively.

Indeed, both recruiters issued statements last month indicating that business is buoyant.

Robert Walters (LSE:RWA) said profit before tax was “expected to be comfortably ahead of market expectations”. The market is currently expecting earnings before interest and tax (EBIT) to be around £47.mln.

PageGroup (LSE:PAGE), meanwhile, said full-year operating profit should reach £165mln, up from £17mln in 2020. The consensus forecast for underling earnings (EBITDA) is £208mln.

Wednesday 12 January

Will Sainsbury’s continue to underwhelm?

Wednesday’s retail sector, with statements expected from blue chips J Sainsburys PLC and JD Sports Fashion PLC (LSE:JD.), along with sofa seller DFS Furniture (LSE:DFS) PLC.

The first trading updates from the retail sector are likely to confirm a pretty miserable festive season on the high street, said analysts at AJ Bell.

But for food retailers, Christmas seemed to be “executed pretty well for shoppers”, said broker Shore Capital, though they cautioned that costs – especially labour – are the main determining factor behind the earnings impact.

Sainsbury’s is not expected by Shore Cap to be among the winners, with present guidance expect to be maintain, with recent industry data backing up its middling performance.

Shares in the orange-tinged grocer hit an all-time high in August on the back of takeover speculation, but have dropped almost a fifth from that level, with half-year results back in November solid enough but leaving forward-looking investors concerned about growth prospects.

JD not used to backing down

For retail growth in recent years, you couldn’t have done much better than JD Sports Fashion PLC (LSE:JD.), which said in the autumn that it reckoned headline profit before tax for the year to January will come in above £750mln, compared to £421mln and £438mln in the past two years.

The shares got a pre-Christmas boost as Nike Inc (NYSE:NKE), for whom JD is a key partner on both sides of the Atlantic, provided an update indicating strong demand for trainers, sportswear and ‘athleisure’ clothing.

Boss Peter Cowgill has yet to officially throw in the towel after seeming to lose a drawn out battle with the competition regulator over the takeover of Footasylum, though reportedly the deadline to appeal the decision has already passed.

Similarly, the company has also had to back down over the bumper pay deal for Cowgill, with more details perhaps emerging around Wednesday’s statement.

Positive direction of travel

Whitbread PLC (LSE:WTB) is well placed for the coming financial year, with the worst of the COVID-19 pandemic set to be over by then, according to a preview of the Premier Inns owner from broker Peel Hunt.

The broker noted that Downing Street appears to be resisting the imposition of further pandemic restrictions, and that the Omicron variant of coronavirus seems to be working its way through the population very quickly, which analysts said bodes well for Whitbread.

Reiterating a ‘buy’ rating for the shares, the analysts believe the recovery “will quickly re-establish itself” from early in the group’s new financial year, which starts in March.

With a share price that has lagged peers since last summer, it is expected to either catch up, or “for the value of this freehold-backed business” for the company to attract a bidder.

No mystery for Vistry

For Vistry Group PLC (LSE:VTY), the company formerly known as Bovis, a trading statement should reveal business as usual, having said in November that it was “firmly on track” to deliver full year underlying pre-tax profit of £345mln.

For that target to remain intact, according to Sophie Lund-Yates, an analyst at Hargreaves Lansdown, it will partly depend on the cost inflation environment, where rising costs have been affecting the whole industry.

“We believe Vistry will have this under control, as it’s able to offset the costs thanks to higher house prices,” she added.

It’s worth noting in passing that the Halifax House Price Index for December indicated the average UK house price had reached a new high.

“That’s good news in the short term but we’ll be keeping an eye on the outlook statement. Rising prices plus increasing interest rates could take some of the heat out the housing market. This isn’t exactly a crisis in the making at this point, but we wonder if management expects demand to temper over the medium term,” Lund-Yates said.

Thursday 13 January

Supermarket forces

In terms of trading momentum, Marks and Spencer Group PLC (LSE:MKS) could be the overall Christma winner, ahead of Lidl and Aldi respectively, analysts at Shore Capital suggested.

Of the Big Four supermarket cabal, Tesco is expected to be “the demonstrable winner”, Shore Cap head of research Clive Black added.

He said both Tesco and Marks were “potentially capable” of delivering a New Year upgrade.

Inflation will be one big talking point for the sector, he added, especially how the German discounters are pursuing their strategies to the detriment of the sector’s earnings outcome, particularly Sainsbury and Tesco.

The house(builder) always wins?

The withdrawal of the stamp duty ‘holiday’ does not seem to have slowed the housing market much, raising the question, what was the chancellor thinking of, giving away billions of pounds of taxpayers’ money to keep the cash-rich housebuilders sweet?

Following Vistry’s lead a day earlier, FTSE 100-listed Persimmon PLC (LSE:PSN) and Taylor Wimpey PLC (LSE:TW.) are set to update the market on Thursday, with both declaring themselves happy with the way things went in 2021 while potentially also raising concerns about rising costs in 2022.

“With £1.15bn of forward sales reserved beyond the current year and a quality pipeline of new developments coming on stream, Persimmon has a robust platform to support its continued high quality growth and the delivery of superior long-term sustainable returns for the benefit of all stakeholders,” the housebuilder said back in November.

The company was sitting on cash of almost £900mln at the time.

Taylor Wimpey, meanwhile, upped its guidance for full-year operating profit to £820mln, said it expects house completions to show modest growth in 2022 before stepping up to more significant levels in 2023, and predicted house price inflation would fully offset inflation in building costs.

Last month chief executive Pete Redfern revealed he plans to step down after 14 years in the role, but will wait until any replacement has been appointed.

Friday 14 January

Big banks kick off new US earnings season

The US reporting season kicks off in earnest on Friday as banking behemoths JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc. (NYSE:C) and Wells Fargo & Company (NYSE:WFC) all release earnings.

“These figures could set the tone for both the FTSE 100 banks (who report in February) and stock markets more widely,” say analyst Russ Mould at AJ Bell.

“The Big Four US banks are expected to report record earnings for 2021 but analysts then expect a dip in 2022, as a good portion of last year’s forecast uplift came from writing back bad loan provisions taken in 2020 rather than growth in loan books or higher net interest margins.”

Stock market investors are expecting an upturn, based on growing expectations for the Federal Reserve to start hiking interest rates.

The banking sector index, Philadelphia KBW Banks, has risen around 10% already this year, while the FTSE All-Share Banks index has gained around 8%.

Analysts expect the big four, including Bank of America (NYSE:BAC), which reports next week on Tuesday 18 January, to report an aggregate net profit of US$117bn, almost double the US$60bn from 2020 and some away above 2019’s previous peak of US$100 billion.

Mould noted that after enjoying a record year in 2006, just before the global financial crisis, the big US banks blew past that record with new highs in 2015, 2016, 2018 and 2019 and look destined to beat that peak in 2021.

“This is in marked contrast to the Big Five in the FTSE 100 who, according to analysts’ forecasts – might just have scraped past their 2007 peak profit of £35.8bn in 2021, when they are estimated to have racked pre-tax earnings of £36.4bn.”

London’s big banks are due to report full-year results next month, with Standard Chartered and NatWest first up on 17 and 18 February, followed by Barclays, HSBC and Lloyds the week after.

Hot Currys?

Currys PLC (LSE:CURY), former Dixons Carphone, joins the retail update fray on Friday, following a Christmas that should have been a bumper one for the number-one electronics outlet in the UK, Scandinavia and Greece, where online sales have grown from 27% of the total in 2020 to almost 50%.

During lockdown, the group took 6% market share online from their competition and, says broker Liberum, which has picked the shares as one of its top choices for 2022, “cemented their dominant #1 market position”.

In the half year statement on 15 December, Currys boss Alex Baldock highlighted that the market had been “softer over recent weeks”, which put the willies up some investors.

However, says Liberum analyst Adam Tomlinson, having grown their market by 20% since COVID, “not only is it unsurprising if there is a slight market slowdown, I suspect that the replacement cycle is now likely to be coming off a higher installed base… even if it doesn’t manifest for another 2-3 years.”

Macro matters

There’s not a huge amount on the macro schedule next week, though US and Chinese inflation figures, the UK short-term indicators and GDP on Friday, plus UK and US retail sales.

UK GDP is expected to show modest growth of 0.4% month-on-month, compared to three-month average of 0.3%.

“I don’t think that’s going to cause any fireworks, but nor would it be slow enough to discourage the Bank of England from tightening policy further. In that respect I imagine it could be positive for the pound,” market analyst Marshall Gittler at BDSwiss.

The main feature of the week in what is an inflation-obsessed market will be the US consumer price index (CPI) on Wednesday, Gittler said.

“The headline figure is expected to rise to an unbelievable 7.1% year-on-year from 6.8%. That would be the highest since Feb 1982 (not much change there; the November figure of 6.8% is the highest since March 1982.)”

Meanwhile, US retail sales are expected to be up slightly, which Gittler said would suggest that the upturn in consumer confidence seen in recent surveys was “real and significant” in the face of the omicron situation.

Various Federal Reserve speakers and the minutes of the latest meeting of the rate-setting Federal Open Market Committee (FOMC), the Fed is deeply concerned about inflation, with committee members seeing inflation readings as “more persistent and widespread than previously anticipated” and a continuing attention being paid to the public’s concern about the sizable increase in the cost of living that had taken place this year.

Outside the usual economic data and coronavirus infections, there are some interesting reports scheduled from the Office for National Statistics, including a productivity review and survey on air passenger attitudes to Covid on Tuesday, and a projection of the  future UK population on Wednesday.

Major announcements expected 10-14 January

Monday 10 January:

Finals: Inland Homes PLC (AIM:INL)

Tuesday 11 January:

Finals: Shoe Zone PLC (AIM:SHOE)

Interims: Games Workshop Group PLC (LSE:GAW)

Trading updates: Electrocomponents PLC (LSE:ECM), Robert Walters PLC (LSE:RWA), SIG PLC (LSE:SHI)

Economic announcements: BRC retail sales (UK), business optimism (US)

Wednesday 12 January:

Trading updates: DFS Furniture (LSE:DFS) PLC, JD Sports Fashion PLC (LSE:JD.), J Sainsburys PLC, Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB), Nichols PLC (AIM:NICL), PageGroup PLC (LSE:PAGE), Vistry Group PLC (LSE:VTY), Whitbread PLC (LSE:WTB)

Interims: Gateley Holdings PLC (AIM:GTLY)

Economic announcements: Consumer price inflation (US), Federal Reserve ‘Beige Book’ (US), producer price index (US)

Thursday 13 January:

Trading updates: ASOS PLC (AIM:ASC), Dunelm Group PLC (LSE:DNLM), Halfords Group PLC (LSE:HFD), Hilton Food Group PLC (LSE:HFG), Marks and Spencer Group PLC (LSE:MKS), Persimmon PLC (LSE:PSN), Taylor Wimpey PLC (LSE:TW.), Tesco PLC (LSE:TSCO), Wood Group (John) PLC

Economic announcements: Bank of England credit conditions (UK), jobless claims (US),

Friday 14 January:

Trading updates: Bellway PLC (LSE:BWY), Currys PLC (LSE:CURY), Experian PLC (LSE:EXPN)

Economic announcements: GDP (UK), industrial & manufacturing production (UK), monthly trade (UK)

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