Boohoo to take to the catwalk on Wednesday, UK and US GDP eyed

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The mid-point of the week, and the final day of September, will see a number of big hitters in the corporate diary, notably fast fashion group Boohoo and catering giant Compass Group.

Results are also due from sensor and control manufacturer Halma, while the macro calendar will feature gross domestic product (GDP) data from both the UK and the US.

Boohoo’s on the catwalk again

Boohoo Group PLC’s (LON:BOO) interims on Wednesday come just days after the fast fashion giant vowed to address the governance issues raised by an independent review.

After its online-only business model proved defensive during lockdown, shares took a hit in July from concerns over hits environmental, social and governance (ESG) practices, amid allegations over the use of sweated labour.

AJ Bell noted the questions raised by the allegations of poor pay and working conditions return to the core question of how Boohoo can make gross margins of 54% and operating margins of 8.7% (on an underlying basis) when its average selling prices are so competitive.

Investors will be interested in any further updates on that as well as sales growth in the second quarter after that 45% surge in the first quarter, to see whether the bad press deterred customers.

The market is also looking for trends in gross margin, which came to 54% in the fiscal year to February 2020, a slight drop on the year before, as well as trends in the adjusted operating margin, which fell very marginally to 8.7% in the year to February 2020.

Shareholders will also want to hear on plans for the AIM giant’s latest acquisitions, Oasis and Warehouse, and how they sit between the higher-end Karen Millen and Coast brands and the more fashion-forward boohoo, PLT and NastyGal.

Is Compass bracing for the winter?

Compass Group PLC (LON:CPG) is releasing a trading update on Wednesday which could bring the tone down again following renewed restrictions around the world.

The caterer had reopened 60% of its business by the end of June, from 55% in May, with sales down 44% in the third quarter.

Investors are wondering whether the FTSE 100 foodservice business can get back to prior peak sales and margins and whether future growth rates resemble prior 4-6% per annum.

Barclays believes this is possible, thanks to costs and contracts sufficiently flexible to recover margins even if volumes remain permanently impaired as well as the potential to gain share from smaller and weaker competitors.

In the short-term, the stock remains subject to COVID-19 fluctuations and a potential tough winter ahead.

Halma to see record profits run coming to an end

Sensor and control manufacturer Halma PLC (LON:HLMA) will report its first half results on Wednesday, which could show some revenue resilience, although the profit trend remains lower.

On September 23 – when the group revealed that its chairman, Paul Walker, will step down from the board by next July after eight years in the role – Halma said its negative revenue trends have improved in the past few months.

Having already reported a 13% decline in sales in the first quarter, the manufacturer of lift door sensors, medical instruments and other banal but important devices said “revenue trends have gradually improved” since.

The FTSE 100-listed delivered a 17th consecutive year of record profits in the full-year to the end of March, 2020, with organic sales up some 5%, but the coronavirus pandemic looks to be bringing that run to an end.

Nicholas Hyett, equity analyst, Hargreaves Lansdown noted: “While coronavirus has inevitably had a knock-on effect since sales only dipped 4% in the first quarter of the new financial year. If that was replicated at the half year that would be a pretty impressive result all things considered.

“Nonetheless the group expects a 5-10% fall in profits in 2021 – not that you’d know its record breaking run is set to come to an end from the share price. At 40.2 times earnings, the PE ratio is close to the highest it’s ever been.

“That’s a real health warning in the current market, and makes putting together a positive investment case for the business a challenge – despite its exceptionally high quality. We think Halma will struggle to change that assessment”.

Significant announcements for Wednesday 30 September:

Trading announcements: Compass Group PLC (LON:CPG), 3i Infrastructure PLC (LON:3IN), Topps Tiles PLC (LON:TPT)

Finals: Innovaderma PLC (LON:IDP), Itaconix PLC (LON:ITX), Premier African Minerals Limited (LON:PREM), Avingtrans PLC (LON:AVG), Bezant Resources PLC (LON:BZT), Bion PLC (LON:BION),

Interims: Boohoo Group PLC (LON:BOO), 888 Holdings PLC (LON:888), Halma PLC (LON:HLMA), Sensyne Health PLC (LON:SENS), Minds + Machines Group Ltd (LON:MMX), OptiBiotix Health PLC (LON:OPTI), S&U PLC (LON:SUS), 1Spatial PLC (LON:SPA), Bushveld Minerals Limited (LON:BMN), Distribution Finance Capital Holdings PLC (LON:DFCH), Getech Group PLC (LON:GTC), Quixant PLC (LON:QXT), Sumo Group PLC (LON:SUMO), Triple Point Social Housing Reit PLC (LON:SOHO), Xaar PLC (LON:XAR), Yu Group PLC (LON:YU.)

Economic data: UK GDP, US GDP, US Chicago PMI

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