The main focus for Wednesday will be across the Atlantic as the US gears up for the pomp and ceremony the will accompany the inauguration of Joe Biden as the next US president, although the current status of the US Capitol as something of a militarized zone following the riot on January 6 by Trump’s supporters may mean the ceremony will be more muted than previous years.
Back in the corporate diary, investors will have plenty to chew on as the cycle of trading updates continues, with announcements from fashion group Burberry, miners Antofagasta and BHP, retailers WH Smith and Dixons and publican Wetherspoons likely to attract attention.
There will also be some action in the macro diary, with UK inflation data expected before the important flash PMIs on Friday.
Luxury sector spotlight with Burberry
The FTSE 100 firm saw revenues drop by a third in its last half-year though they improved in the second quarter thanks to the group’s ability to attract new and younger customers.
The company also avoided having sales to shift stock to keep an emphasis on brand preservation and elevation, key parts of its current strategy.
“Cost-saving efforts have been coming in ahead of plan and there has been impressive growth in its online business though, helped also by better trading in Mainland China, Korea and the US,” analysts at Hargreaves Lansdown noted.
“Its customers are mainly from higher income brackets with significant buying power, but with the economic outlook uncertain there may well be more reticence than usual to spend on big-ticket accessories. Burberry also relies quite heavily on tourists and the latest rounds of store closures across Europe in particular is likely to have weighed on demand and its prospects for recovery are likely to be linked to a rebound in global travel,” they added.
Brace for WH Smith Christmas update
WH Smith PLC (LON:SMWH) is publishing its Christmas trading update on Wednesday, which investors are probably bracing for, considering a big chunk of its estate was forced to close in the middle of the key festive period.
The newsagent’s group had already been struggling throughout the pandemic due to its focus on travel locations and reliance on impulse purchases, with shares still well below pre-pandemic levels.
“Vaccine rollouts will have come with a sigh of relief for the company, offering some light at the end of a very dark tunnel,” analysts at Hargreaves Lansdown commented.
“But with the third national lockdown that tunnel has become even longer and the company will no doubt be continuing negotiations with landlords to extend payment terms and reduce rents to help it survive the crisis.’’
Dixons calls in with update
Dixons Carphone PLC (LON:DC.) will release a trading update on Wednesday, with investors likely hoping the company can continue its recent strong performance as its digital operation has managed to help offset some of the effects of store closures during lockdown.
The firm’s Shoplive platform, which allows customers to book virtual appointments with assistants in-store and see video demos for goods from their own homes, has also helped to offset the store closures, although the company has still remained mostly cautious on outlook due to the pandemic as consumer spending has slowed.
With this in mind, investors are likely to keep an eye on how margins are holding up and that the digital sales operation in continuing to perform well into the new year, as well as how well the firm performed over the festive period.
Sour read for Spoons
With the estate closed and effectively unprofitable between November 2020 and March 2021, investors will want to hear on liquidity and cash burn.
In the last update in November, the company had £234mln of financial headroom, equivalent to 16 months of liquidity under full closure.
The publican will also have an opportunity to update its guidance on profitability, or lack thereof and continue its campaign for the VAT cut to be made permanent, according to Peel Hunt.
Significant announcements for Wednesday January 20:
Trading announcements: Antofagasta PLC (LON:ANTO), BHP Group PLC (LON:BHP), Burberry Group PLC (LON:BRBY), WH Smith PLC (LON:SMWH), CMC Markets PLC (LON:CMCX), Pearson PLC (LON:PSON), Diploma PLC (LON:DPLM), JD Wetherspoon PLC (LON:JDW), Dixons Carphone PLC (LON:DC.), Cairn Energy PLC (LON:CNE), City of London Investment Group PLC (LON:CLIG)
Economic data: UK inflation, UK PPI