ASOS, Barratt, Dunelm and Wetherspoon’s lead corporate schedule for coming week, UK unemployment eye
The coming week will see a number of market big hitters delivering updates and results, including previously delayed figures from housebuilder Barratt and publican Wetherspoons.
Also in the diary is online fashion giant ASOS, fishing tackle seller Angling Direct, homeware retailer Dunelm, Domino’s Pizza and property website Onthemarket.
On the macro front, there will be eyes on the UK’s unemployment figures on Tuesday, while Friday will see close attention paid to the next US presidential debate between Donald Trump and Joe Biden.
Onthemarket is ontheschedule
Onthemarket PLC (LON:OTMP) is publishing results for the six months to end July on Tuesday.
It will be a tale of two halves, showing a hiatus in activity during lockdown followed by a sharp upturn after restrictions were eased and the government implemented initiatives to help the housing market.
The agent-backed property portal had GBP10mln in the bank at the end of August, up by GBP600,000 compared to the end of June, with GBP2.2mln of deferred creditor payments.
Investors will want to hear more on the record lead generation during August and how it can pan out during the winter, as well as the partnership with Taylor Wimpey.
Another focus will be the progress in signing up agents to paid listings contracts and attracting new business, as house broker Shore Capital noted COVID-19 will have been a catalyst for agents to review their portal choices and the value that these deliver.
“We believe this dynamic could accelerate the group’s already attractive medium-term growth potential – with its increasingly compelling and comprehensive offering, commitment to fair pricing and unique ability to offer equity to listing agents all positive contributory factors,” analysts commented.
ASOS finals in the bag
ASOS PLC (LON:ASC) is releasing its final results on Wednesday, which should not come as a surprise after the online retailer guided for a 17-19% jump in sales to around GBP3.2bn while pre-tax profit should come in at GBP130-150mln.
It is nonetheless set to be a huge increase from last year’s GBP33mln incident after substantial investments in IT, operational issues at its warehouses in the US and UK, poor stock availability and aggressive discounting by competitors.
Investors will look at margins, a weak point in recent years, although fewer returns during lockdown and reduced promotional activity may help.
“The question though is whether these trends will continue in more ‘normal’ market conditions. A jittery economic outlook means it’s possible the sales stickers have been brought out of hibernation,” analysts at Hargreaves Lansdown commented.
“Net debt stood at around 1.8 times cash profits at the last count – more than we’d like. However, the group continues to target being net cash by the end of the year. We’ll be pretty impressed if that’s delivered.”
Conflicting expectations for Barratt
Barratt Developments PLC (LON:BDEV) will provide a trading update on Wednesday after saying early last month that activity in its new financial year has been “encouraging” but that the time was not yet right to return to the dividend list.
In the past week, there has been conflicting information about the housebuilding sector, with analysts at Credit Suisse saying customer demand and house prices look highly unlikely to fade before the end of the year, and that sector valuations were “have not been sustainably cheaper for almost a decade”.
But data from surveyors cast a little doubt on the current ‘mini-boom’ in the UK’s housing market/
The latest poll on surveyors found that while demand and sales in the market remain “firmly positive”, the outlook for sales expectations over the next 12 months “still portray a more subdued outlook further ahead”.
In early September month ago that Barratt reported a 46% decline in annual profits but noted that enjoyed a boom in sales in recent weeks, with an, resulting in net private reservations per active outlet per average week of 0.94 versus 0.68.
A 62% increase in home completion volumes in the eight weeks to August 23 to 1,439 was attributed to a combination of pent-up demand, the Stamp Duty holiday “and an understanding that Help to Buy will only be available to first-time buyers and regional home price caps will exist from April 2021”.
The key to the AGM update, said analysts at Peel Hunt, will be recent trading activity and whether there has been any change to the positive pattern seen in the last few months, including an average 314 net private reservations per week versus 250 per week for the previous year. “We suspect not.”
Anecdotal comments and house price data indicate that there may be some good news on selling prices, while production rates will also be surveyed, though the end of the furlough scheme and a rising second wave in London and the North paints a worrying picture.
Angling Direct reels in results
Fishing tackle and equipment retailer Angling Direct PLC (LON:ANG) will post its interim results on Wednesday after previously reporting a rebound in sales after pent up demand was released following a relaxation of coronavirus restrictions in the UK over the summer months.
However, the figures themselves are unlikely to bring any major surprises for investors, with the company having already reporting half-year revenue growth of 21%, boosted by a 43% rise in online sales during the period.
The outlook is likely to hold more attention, particularly as the company has said it stands to benefit from a trend in ‘staycations’ caused by travel restrictions during the pandemic.
With many countries still keeping their borders closed, investors may want an update on how the group plans to exploit the opportunity, as well as keeping an eye on any potential closure risks as the government mulls renewed lockdown measures during the second wave of infections.
Updates from FTSE 250 recruitment companies PageGroup PLC (LON:PAGE) and Hays PLC (LON:HAS) on Wednesday and Thursday come a week after rival Robert Walters said it was reinstating its interim dividend.
Like Robert Walters, both Page and Hays had seen a slowdown in gross profit before the pandemic struck in the first quarter, which led to both being hit all the harder, said analysts at AJ Bell.
In the three months to end-June, Hay’s fourth quarter, its net fee income fell 34%, while Page’s plunged 47%, with the UK the worst performing region for both.
For the latest quarter, the analysts are looking for a 31% fall for Hays and 38% for Page.
One trend to note will be the mix of activity between permanent and temporary hires.
“When companies feel more confident they are likely to lean toward offering permanent positions while they may prefer to offer only temporary posts during more uncertain times,” said AJ Bell.
“Fees from both temporary and permanent hiring mandates fell sharply in calendar Q2, but the slump in income from permanent hires was much deeper at both Page and Hays.”
Domino’s delivers piping hot trading update
Thursday will bring a trading update from Domino’s Pizza Group PLC (LON:DOM), with the continuing presence of lockdown measures in the UK likely to have boosted demand for home ordering and delivery which in turn is expected to deliver a bigger profit slice in the third quarter.
The company reported 5.5% sales growth in its second quarter, lifted by a 22% rise in deliveries and offsetting a sharp decline in collections and keeping it ahead of its dine-in competitors such as Pizza Express and Pizza Hut, both of whom have felt the sting of lockdown measures.
While Domino’s is still on an expansionary footing, previously announcing around 5,000 new jobs, investors are more likely to be concerned about the firm’s ongoing dispute with its franchisees over profit sharing as well as labour and ingredient costs which could take a bite out of the bottom line.
Dunelm updates as it heads into peak season
Thursday will also bring an update from homeware retailer Dunelm Group plc (LON:DNLM), although investors may still be in a bit of grumpy mood after the company said in its final results in September that it was skipping its final dividend for its last full year to save cash ahead of its peak winter trading season.
With this in mind, the outlook is likely to be key, as well as whether the firm is worried that the return of stricter lockdown measures could impact its customer footfall across the UK.
However, the company previously reported a triple-digit spike in home delivery sales for the first two months of its current year, and with online now making up around a third of revenues investors will be hoping this can offset any weakness across the brick and mortar estate should lockdown make a return.
Investors ask Wetherspoons: ‘How deep is your loss?’
The chain’s business model, based on low prices and high volumes, has been under pressure during the pandemic, forcing a GBP15mln spend on hygiene and social distancing measures after the summer reopenings.
More recently, Wetherspoons increased prices by 2-3% in July, participated in the government’s Eat Out To Help Out scheme in August and made its own ‘Stay Out to Help Out’ to run from September to November 11.
“Given that trading hours and external vertical drinking has been curtailed, combined with accelerating supply reduction, one could make the case that JDW should consider moving some prices back up,” analysts at Peel Hunt noted.
“This would support profits, which will otherwise be assisted by plans to make up to 130 head office staff redundant.”
The focus on Friday will be on September like-for-like sales, coming after a 17% in the 44 days to August 16, alongside debt reduction since the estate reopened and margin prospects in the year ahead.
Macro matters (as well as Trump’s health)
Unemployment data on Tuesday is the only major UK economic indicator of the week, though there is BRC retail data on Monday.
Economists differ on whether the UK unemployment rate will increase in the three months to August, though for August alone the expectation is that it will increase by 0.2 percentage points as various support schemes start to expire.
The more timely claimant count rate and the jobless claims changes for September may be more revealing, while the main furlough scheme does not come to a close until the end of October.
The European Council (EC) summit on Thursday and Friday has been billed as a crucial Brexit event but has been surpassed by the extension of negotiations.
The key to financial markets this coming week will not be found in the indicators, several analysts suggested, but in Washington.
“Trump’s health will be a constant source of concern. While he claims to be over his illness, reasonable people can have their doubts,” said market analyst Marshall Gittler at BDSwiss.
A second US presidential debate currently does not look like happening, following President Trump’s announcement that he wouldn’t take part as it would be held virtually, despite trailing by nearly 10 points in the polls.
“In terms of markets, what was noticeable was the increasing focus on a potential Biden presidency and a possible blue wave,” noted Deutsche Bank‘s Jim Reid, with the Democratic Party’s chances of winning the Senate up to 68% and so raising the prospect of significant further stimulus in the first quarter of 2021.
Goldman Sachs‘ chief economist agrees, recently telling the firm’s clients that the expected “blue sweep” of both Congress and the White House, “would likely prompt us to upgrade our forecasts,” as it would increase the likelihood of a $2tn fiscal stimulus package shortly after the inauguration (20 January) “followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the long-term tax increases on corporations and upper-income earners.”
So polls showing Joe Biden increasing his lead should be supportive for stocks and therefore negative for the dollar.
US banks line up with third quarter figures
Over in the US, the country’s biggest main street banks are due to kick off the third quarter earnings season next week, with JP Morgan Chase & Co (NYSE:JPM) and Citigroup Inc (NYSE:C) reporting figures on Tuesday followed by Bank of America Corp (NYSE:BAC), Goldman Sachs Group Inc (NYSE:GS) and Wells Fargo & Co (NYSE:WFC) on Wednesday and Morgan Stanley (NYSE:MS) on Thursday.
On both sides of the Atlantic, the ongoing recession coupled with rising numbers of bad loans and margin pressures have caused pain for the finance industry, with provisions for bad loans across all four banks hitting around US$33bn at the end of the second quarter, the highest figure since the third quarter of 2009 at the height of the global financial crisis.
The result has been deflated profit and loss accounts as combined net incomes have fallen sharply, around 75% year-on-year between April and June, however, some analysts are expecting an earnings rebound in the third quarter as the US economy recovers from the effects of lockdown.
Also in focus will be deposit levels, which will indicate confidence levels among US consumers and businesses, as well as the all-important dividend payments, although payouts are likely to stay relatively static after the Federal Reserve extended its cap on divis until the end of the year.
UK investors will also be keeping an eye on the US banks results ahead of the ‘Big Five’ British banks, which are due to report at the end of October.
Significant announcements expected for week ending 16 October:
Monday October 12:
US Columbus Day; Canadian Thanksgiving
Trading updates: XP Power Ltd (LON:XPP)
Interims: e-therapeutics PLC (LON:ETX)
Tuesday October 13:
Economic data: UK unemployment; US consumer price index
Wednesday October 14:
Economic data: US producer price index
Thursday October 15:
EU Council meeting
Trading updates: Domino’s Pizza Group PLC (LON:DOM), Dunelm PLC (LON:DNLM), Hays PLC (LON:HAS), Rio Tinto PLC (LON:RIO), Mondi PLC (LON:MNDI), Mediclinic International Plc (LON:MDC), Rathbone Bros PLC (LON:RAT), discoverIE Group PLC (LON:DSCV)
AGMs: BHP PLC (LON:BHP)
Economic data: US weekly jobless claims; US Philly Fed manufacturing survey; NY Empire State manufacturing survey
Friday October 16:
US Presidential debate; IMF meeting
Economic data: US retails sales; US Michigan consumer sentiment