News from Britain’s biggest retailer Tesco PLC (LON:TSCO) will on the main focus on Thursday, with the FTSE 100-listed firm following supermarket rivals Morrison’s and Sainsbury’s in providing an update on trading over the festive period.
For the first half of its financial year to August 29, 2021, Tesco increased like-for-like sales (LFL) by 6.6%, with UK and Ireland LFLs up 7.2%.
Although many Tesco investors are perhaps just hanging around in anticipation of the 51p per share special dividend promised towards the end of next month following its Asia disposals, many will be interested to see what’s happening with the supermarket giant, which has a 27% UK market share, as it shares are lower than they were a year ago, despite scoring unusually high sales in 2020 because of the coronavirus (COVID-19) pandemic.
Though the company does not usually publish profit or cash flow figures alongside its Christmas update, it will be important to look at any commentary surrounding full-year profit expectations, said analyst Sophie Lund-Yates at Hargreaves Lansdown.
“Huge costs associated with COVID-19 means Tesco’s half-year profits shrunk, ignoring the benefits of business rate relief. To protect margins, higher costs need to be offset by increased scale. So, we’ll be looking to see just how much sales rose in the third quarter, especially as November saw the re-introduction of tougher restrictions for much of the UK,” she noted in a preview.
Boohoo and Primark updates
Clothing retailers Boohoo Group PLC (LON:BOO) and Primark owner Associated British Foods PLC (LON:ABF) are also set to give their trading statements covering the Christmas and lockdown impacted trading period.
The former, an online retailer, has proven hugely popular during the pandemic and it is not expected to slow down in the new year, although its ESG credentials have been put into discussion after last summer’s supplier scandal and may remain a headache for a while.
Christmas is naturally important for retailers, even though 2020’s festive trading period was far from a normal or comparable fare.
This year’s performance has never “been less relevant to the sector and share price outlook”, according to Peel Hunt.
“With few liquidity concerns, the profit and cash impact of November’s lockdown and Tier 4 restrictions should be bearable for most,” the City broker’s analysts noted in their Boohoo preview.
“The key metrics aren’t so much December like-for-like sales, but rather customer relevance and market positioning,” they added.
Without an online presence, ABF’s clothing retail chain Primark has likely had a tough festive period but its vast range and low prices remain well-loved by customers, with many preferring to wait for shops to reopen rather than turning to other brands, so analysts have not been too worried about the potential for recovery.
However, its profits are expected to take a big dent until lockdown restrictions are lifted.
Whitbread faces restless start to 2021
The company has already asked its landlords for a 50% rent holiday over the next three months to help it weather the effects of the pandemic, so investors will likely want news on how these discussions are going when it updates on trading on Thursday.
However, with commercial landlords already facing heavy losses during the pandemic, the outlook looks murky at best.
Whitbread’s update may also be eyed for any news of additional job cuts as a result of the prolonged restrictions after saying in September that 6,000 workers could be laid off.
With the company likely to keep burning cash too, having already scrapped its dividend, investors will also be keeping an eye on any plans the company has to tap the market for fresh funds.
Significant announcements expected on Thursday, January 14:
Trading announcements: Tesco PLC (LON:TSCO), Boohoo Group PLC (LON:BOO), Associated British Foods PLC (LON:ABF), Whitbread PLC (LON:WTB), Dunelm Group plc (LON:DNLM), Taylor Wimpey PLC (LON:TW.), Hays PLC (LON:HAS), Ashmore Group PLC (LON:ASHM), Network International Holdings PLC (LON:NETW), John Wood Group PLC (LON:WG.), Halfords Group PLC (LON:HFD), Centrica PLC (LON:CAN)
Economic data: US weekly jobless claims