Companies Reporting: Kingfisher, Marks & Spencer, Pets at Home, SSE

Here’s our regular look at the FTSE 350 and a selection of other companies reporting from 23 to 27 May.

• Will Kingfisher hang onto the market share it acquired during the pandemic?
• Growth online will be watched at Marks & Spencer
• NVIDIA could come good on its revenue target
• Pets at Home looks to finish the year with record sales and profit growth
• Autotrader should indicate any effects of inflation
• We’ll see how SSE’s push into renewables is shaping up

Kingfisher, Q1 Trading Statement, Monday 23 May

Susannah Streeter, Senior Investment and Markets Analyst “The booming interest in home improvements seen over the pandemic should be a source of longer-term customers for B&Q and Screwfix owner Kingfisher, although there will be concern that soaring inflation could see some holding tighter to the purse strings in the months to come.  Although some fresh DIY converts may put down their paintbrushes forever, it’s likely that a sizeable chunk that picked up a hammer for the first time will keep coming back, thanks to their new skills and a shortage of labour in the building trade. There will be particular interest in this update as to whether Kingfisher has managed to hang onto the higher market share it acquired during the pandemic. Investors will be watching out for signs that the ongoing supply chain issues could still be a lingering headache for the company, particularly with the price of raw materials staying volatile.  There’s also speculation that further dividends could be on the cards, reflecting Kingfisher’s strong balance sheet.”

Marks & Spencer, Full Year Results, Wednesday 25 May

Sophie Lund-Yates, Equity Analyst “Marks and Spencer finds itself in a tricky spot with inflation running high. Mid-week treats are likely to be rubbed off shopping lists, meaning the Food business may be in a for a tough time, as households scramble to economise. The flip side of this of course is that the group’s core demographic is unlikely to be too perturbed by the cost of living crisis, which should offset some lost sales.

The clothing business has had a very tough few years, but has made good progress of late. Most importantly, growth online is what to watch next week. A failure to keep hold of digital momentum is unlikely to go down well with the market.”

NVIDIA, Q1 Results, Wednesday 25 May

Sophie Lund-Yates, Equity Analyst “For the current quarter, NVIDIA expects revenue to be within 2% of $8.1bn. There is reason to think the group will come good on this target, although of course there are no guarantees. The specialised chip-maker is being buoyed by a huge boost in gaming. Its RTX 30 series has been described as ”the most revolutionary graphics card in years” But there’ll be a particular eye on the Data Centres business.

NVIDIA produces cutting edge hardware for training artificial intelligence (AI) software, and at $3.3bn the division holds almost as much weight as the core gaming business. There may also be commentary around the recent weakness in crypto currency, and what this could mean for NIVIDA’s bitcoin products.”

Pets at Home, Full Year Results, Wednesday 25 May

Matt Britzman, Equity Analyst “Working from home and perhaps the renewed popularity of rural living meant UK pet ownership shows little signs of weakness. Pets at Home therefore expects to post record sales and profit growth with underlying pre-tax profit of £140m at the full year mark. Retail momentum has remained strong, with the Puppy and Kitten Club still adding around 24,000 new members per week and VIP members reaching 7m. Growing these membership bases is important, as members have typically spent more money across a range of channels than regular customers.

Commentary on costs, and their expected impact on margins, will be something to watch out for. Costs savings and work with suppliers has helped mitigate the impact of rising costs, but the real effect probably hasn’t been felt yet. Guidance on next year should give an indication as to what extent these could impact profits, the group has previously said it expects around 90% year-on-year increases on both energy and freight costs.”

Auto Trader, Full Year Results, Thursday 26 May

Sophie Lund-Yates, Equity Analyst “Auto Trader doesn’t directly benefit from soaring used car prices. Rather, it’s more interested in the number of dealerships and individuals in operation who are able to pay fees to advertise on the site. That makes Auto Trader more protected from the ups and downs of the car market, but does make it sensitive to the tough conditions its core customers face.

As inflation takes hold and households decide to put off big ticket items, like a new car, that could put dealerships under strain. While not a flashing red indicator, it’s definitely something to look for in management’s commentary.”

SSE, Full Year Results, Thursday 26 May

Laura Hoy, Equity Analyst “Renewables will be the main focus when SSE reports, despite only being responsible for around 7% of operating profits. That’s because the group’s Renewables division is said to be the future for SSE, with £12.5bn committed to its expansion over the next few years. Management’s said this year’s investment will exceed £2bn, and we’ll be keen to see how far over it stretches.

Output will be the figure to watch for the renewables arm, after worse than expected weather has kept the division from living up to its potential. Management’s expecting output from renewables to be 12% below its target – an improvement from the 19% previously guided. Debt is another figure to watch and has been a bugbear for SSE for some time. Management’s expecting net debt below £9bn, which is still roughly 4 times forecast cash profits. Asset sales have been driving the group’s debt reduction thus far, so management should step in with a clear plan to drive debt to more manageable levels in the years to come.”

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FTSE 100, FTSE 250 and selected other companies scheduled to report

This article is 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.

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