Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Full year results from J Sainsbury [LON:SBRY] are out this morning, one of the companies which on the face of it would seem set to profit from the COVID-19 outbreak. Perhaps more significant however is the early assessment of business for the year ahead. Consumer demand for groceries is soaring along with the company receiving the benefits of a significant break over business rates, but the note suggests that the upside here will be offset by falling consumer confidence, lower fuel sales and additional costs of protecting staff. Only time will tell how this plays out, but for the first 7 weeks of the new trading year total retail sales were up 8%, as fuel sales fell by 52%. Given the uncertainty, decisions over dividend payments are being deferred and there’s also a nod to the fact that executive remuneration fell last year. It seems there’s a good chance Sainsburys will come out of this situation ahead, with the note reflecting the fact some careful management will be necessary here. Group sales last year were broadly flat, pre-tax profits fell 2% and debt was reduced by more than 20%.
Another company seeing a bounce in sales from COVID-19 is Reckitt Benckiser [LON:RB], who have released a Q1 update this morning. Like for like sales are up 13%, with especially strong demand for its over the counter products such as Dettol, although the challenge – which the company has so far met – is maintaining supply chains. RB expects the performance for the year to be better than previously expected, but notes higher operating costs may be seen. More defined guidance is expected at the half year point.
Lloyds Banking Group
Q1 numbers from Lloyds Banking Group [LON:LLOY] have been posted with the company barely scraping a profit after significant impairment charges of £1.4 billion were made in relation to COVID-19. This pushed the result well below analyst forecasts, but as the country’s largest provider of mortgages – and a significant backer of businesses – it underlines the perception that the economy is in for a rough ride.
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