Our regular look at the FTSE 350 and a selection of other companies reporting from 9-13 January 2023
- Will J Sainsbury’s competitive pricing continue to reduce returns?
- ASOS will be looking to end its downward trajectory
- Halfords is hoping for a strong Christmas period to keep profit guidance feasible
- Marks & Spencer reveals the impact of cost-of-living headwinds
- A muted market reaction expected for Persimmon
- Tesco hopes to report a resilient Christmas trading season amid the cost-of-living crisis
J Sainsbury, Q3 Trading Statement, Wednesday 11 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown: “In response to customers being more cautious, Sainsburys LON:SBRY has been taking aggressive action in trying to keep prices low and already it seems this has been paying off. According to the latest snapshot from Kantar, sales rose by 6% in the crucial pre-Christmas period.
The group’s been able to offer a strong value proposition, and this looks like it helped it stave off the increased competition from discounters. However, while this is the right move from a competitive angle, it’s already been affecting profits, which fell 8% in the first half, and so investors will be keen to find out to what extent this trend has continued. But hanging onto customers and luring in new shoppers should help put the company in a better position once inflationary pressures fall back.
General merchandise sales will also be closely watched, given that they are more sensitive to cost-of-living pressures and Sainsbury’s have skin in the game here by owning Argos. However recent retail sales figures indicated that department store and homeware sales have held up slightly better than forecast in the run up to Christmas. This could mean that Argos may put in a more resilient showing than expected. “
ASOS, Q1 Trading Statement, Thursday 12 January
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “ASOS LON:ASC entered the Christmas period on the back of a disappointing 2022, which saw the online fashion retailer’s valuation fall by more than 75% in the year. This decline came as full-year profit before tax tumbled to £22m, down from £194m the previous year. Next week’s trading statement will give us an indication of whether this downward trajectory is expected to continue.
High inflation throughout 2022 left consumers with less cash in their pockets, meaning they had less money to spend on updating their wardrobe. These cash-strapped consumers also returned more items last year, causing higher operating costs and elevated stock levels. With Christmas typically being a time of bumper sales for retailers, we’re keen to see if this has helped reduce the group’s excess stock.
With ASOS selling products right along the price scale, it was well set up well to offer something for everyone this Christmas. As such, next week’s figures could give an early indication as to how clothing retailers fared.”
Halfords, Q3 Trading Statement, Thursday 12 January
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “In November, Halfords LON:HFD outlined that full-year profits are expected to be at the lower end of their previous £65m to £75m guidance range. Next week’s trading statement will provide some steer as to whether this guidance remains feasible.
As the cost-of-living crisis continues, people’s disposable income will shrink. This poses challenges for some of the more discretionary products the group offers. And like everyone else, Halfords has seen its costs rise significantly this year. To mitigate this, the group’s expected to deliver more than £20m in cost savings by financial year-end. We wonder if that target will need to be extended, if conditions prove tougher than predicted.
Luckily, Halfords is already underway with its transition towards more reliable service revenue. A strong uptake to their Motoring Loyalty Club, which offers discounts on certain services, saw almost one million members join in less than nine months. We’re eager to see how many more members Halfords have locked into their Motoring Club since the last update.
While the outlook is challenging in the short-term, we remain cautiously optimistic about Halfords’ longer-term plan. Next week’s trading statement will offer an insight into consumer spending during this tough time.
Marks & Spencer, Christmas Trading Statement, Thursday 12 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown: “Christmas is typically boom-time for Marks & Spencer LON:MKS as it’s the time of year when shoppers splash out if they can to make the festive season that extra bit special – investors will be keen to find out if that has been the case this time around. Although M&S won’t be completely immune to the cost-of-living headwinds whipping around, it has a different proposition to the other big grocers, and its classic customer is unlikely to stop shopping at its stores solely because of inflationary pressures.
Rail strikes might have reduced trade at its convenience stores across the transport network, but its retail park locations are likely to have stayed resilient. There will be a keen eye trained on progress in the company’s shift away from under-performing stores in high streets to these out-of-town locations where food is prioritised, with click and collect services alongside. This strategy seems to be paying off and is likely to be accelerated.”
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- Companies Reporting: Ibstock, Disney, Persimmon
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Persimmon, Trading Statement, Thursday 12 January
Steve Clayton, Head of Equity Funds, Hargreaves Lansdown: “Persimmon LON:PSN will be following hard on the heels of Barratt Developments LON:BDEV when they report on trading 12 January, the day after their rival reports. In their last update, Persimmon revealed a slower pace of reservations at their development sites as consumers paused to work out how rising interest rates and the rapidly increasing cost of living would impact them. Interest rates rose further in December and anyone with a smart meter will be well aware of how much impact the cold weather is having on their heating bills.
Meanwhile, the job market remains pretty tight, reducing the prospects of an offsetting reduction in pressure from the operating costs side of the business. Persimmon tightened their distribution policy earlier in 2022 and investors will be nervously awaiting any further comments. But markets of course tend to price-in expectations and these challenges are already clear. So how the stock moves on the day will be very dependent on the mood music surrounding the data. If the company can show confidence in maintaining their margins, then that news could be well received. But with Barratt providing an update on general housing market conditions the day before, we expect that the reaction on the day itself is likely to be muted.”
Tesco, Q3 Trading Statement, Thursday 12 January
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “Christmas is a crucial time for supermarkets. It’s traditionally a time of bumper sales and profit-making as customers splurge on extra special food and gifts. Next week, we’ll find out if this was the case for Tesco LON:TSCO. The challenge this year of course is the ongoing cost-of-living crisis, which has been pushing customers towards the discounters.
Specifically, we’d like to know if Tesco was forced to offer steeper discounts than expected to entice and retain customers. If that’s the case, it’s likely profit expectations could be tempered for the full year. This is an existing challenge for Tesco. We heard at the half year that despite higher sales, underlying operating profit fell 9.8% to £1.3bn, as inflation pushed costs higher and consumers shifted to own-brand items.
To Tesco’s credit, its huge scale and hard work on positioning itself as a better-value offering should stop any dramatic shifts. As one of the first, and arguably better-run, retail giants reporting Christmas results, next week’s numbers will be taken as a bellwether for the wider industry. “
This article has been brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.
FTSE 100, FTSE 250 and selected other companies scheduled to report
| 09-Jan | |
| No FTSE350 Reporters | |
| 10-Jan | |
| No FTSE350 Reporters | |
| 11-Jan | |
| J Sainsbury | Q3 Trading Statement |
| Page Group | Q4 Trading Statement |
| Barratt Developments | Trading Statement |
| Ferrexpo | Q4 Production Volume |
| 12-Jan | |
| Whitbread | Q3 Trading Statement |
| ASOS | Q1 Trading Statement |
| Dechra Pharmaceuticals | Half Year Trading Statement |
| John Wood Group | Full-year Trading Statement |
| Marks & Spencer | Christmas Trading Statement |
| Halfords | Q3 Trading Statement |
| Persimmon | Trading Statement |
| Tesco | Q3 Trading Statement |
| Hilton Food Group | Trading Statement |
| 13-Jan | |
| Taylor Wimpey | Trading Statement |
