London’s corporate calendar begins to look a bit busier on Tuesday after a quiet start to the week and the doldrums of last month.
Retail industry data from the BRC overnight will be followed by a couple of retail-related results, in the form of Ted Baker and box maker DS Smith, with other sectors also in focus including housebuilding via Vistry and consumer goods from white-label manufacturer McBride.
Will Ted Baker stay in fashion for investors?
The fashion designer found itself with big holes in its business model well before the pandemic, which hit it more than other retailers due to its focus on formalwear and clothes for going out.
“The decline of the department store is a particularly thorny issue for Ted Baker given its large number of concessions and overall, the high costs of running bricks and mortar stores is a big headache. The group has been cutting costs as fast as it’s been cutting occasion wear ranges and it’s making headway on improving its buying practices,” said Susannah Streeter, senior analyst at Hargreaves Lansdown.
“Its online sales though still need a significant boost so progress made here will be crucial and will be a key metric to watch. Issuing GBP100 million in new shares gave management the firepower to transform the group’s fortunes, but the team is now under pressure to come up with the goods.”
DS Smith unpacks quarterly trends
Cardboard boxes have gone from mundane to relatively exciting (for shoppers and investors) over the past couple of years, and the momentum from the pandemic-powered online retail surge is expected to have continued through the past quarter for cardboard box-maker DS Smith PLC (LSE:SMDS) (LSE:SMDS), which reports on Tuesday.
A huge year-on-year increase in volumes is expected for what is the FTSE 100 group’s first quarter, owing to the pandemic-related weakness seen in last year’s figures, said Hargreaves Lansdown analyst Laura Hoy.
“But the group should be at or close-to pre-pandemic levels, putting it on-track to outperform 2019 sales.
“Volumes improved through the second half of last year, but management flagged inflation as a potential challenge. The increase is expected to be passed seamlessly on to customers, most of which will likely stomach the higher bill.
Three months isn’t long enough to say the strategy is iron-clad, but next week should give investors some idea of whether or not things are going to plan.”
Building up Vistry’s interims
Vistry Group PLC (LSE:VTY) (LSE:VTY), the housebuilder formerly known as Bovis Homes, has already spilt some of the beans on first-half trading in July so the focus in the interims will be on the elements missing from the July update, namely profitability and full-year guidance.
UBS is forecasting earnings before interest and tax of GBP173mln, including contributions from joint ventures.
This implies an operating margin of 13.6%; UBS helpfully notes that the market consensus is for an operating margin of 14.1%.
The Swiss bank is forecasting a profit before tax of GBP161mln for Tuesday’s interims.
“We think house price inflation continues to offset pressures in the material supply chain, and weekly reservations remained in the regions of 0.7-0.8x,” UBS said.
McBride of Frankenstein?
The problem is the not the period to June just ended, but the current fiscal year the own label and cleaning products group warned a few weeks ago.
Rising costs mean profits in the year to June 2022 will be as much as 65% below market estimates of GBP19.7mln.
“The raw material environment remains extremely challenging both in terms of exceptional price increases and supply availability,” it said.
How successful it has been in passing on in some of these costs and when it sees some of the pressure easing will be the things to watch for, but with warnings about shortages almost daily recovery might take some time.
Significant announcements on Tuesday 7 September:
Finals: McBride PLC (LSE:MCB)
Interims: Bango PLC (AIM:BGO, FRA:B10) (AIM:BGO, FRA:B10), Gamma Communications (AIM:GAMA) (AIM:GAMA), James Fisher plc, Lamprell PLC (LSE:LAM, OTC:LMPRF) (LSE:LAM, OTC:LMPRF), Luceco PLC (LSE:LUCE) (LSE:LUCE), Parsley Box plc, Vistry Group PLC (LSE:VTY)
Economic data: UK retail sales, Halifax house price index