Week Ahead

Grocers, Wood and US inflation get top billing

Marks & Spencer Gyle Edinburgh
Marks & Spencer updates on Thursday (pic: Terry Murden)

An upbeat trading statement from Next and a profits warning from JD Sports has delivered mixed messages on the retail sector’s festive performance.

Analysts will look to Marks & Spencer, Tesco and Sainsbury’s for further clues when they update in the coming week. Shares in M&S ended 2023 at their highest level since early 2019, buoyed by August’s trading statement update and then November’s equally positive first-half results.

At the half-year stage, food sales were up 11.7% like-for-like, and clothing & home by 5.5%, so that total UK sales were up 9.6%. International rose 3.9% (using constant currencies).

Comments on dividends will almost certainly be left to the full-year results in May, say AJ Bell analysts, though M&S did re-join the dividend list with an interim payment of 1p a share. That was the first distribution since the first half of fiscal 2020.

First of the key retailers will be Sainsbury on Wednesday with an update on third-quarter trading, where analysts at Jefferies forecast an acceleration in grocery sales growth to 9.5% from 8.9% in the second quarter.

Tesco will deliver its trading update for the 19 weeks to 6 January alongside M&S. Analysts at Citi said they expect Tesco to report strong third-quarter trading, with UK like-for-like sales up 7.5%, but said there was upside risk to full-year profit forecasts on the back of market share gains and “lingering” food inflation.

Aberdeen-based John Wood Group updates on Friday. In November chief executive Ken Gilmartin hailed progress at the energy service company though the order book at 30 September was around $5.9 billion, flat on a comparable basis to September 2022 and slightly lower than the position at June 2023 ($6bn).

The macroeconomic headlines are likely to be dominated by the US inflation figures. In November, the CPI rose by just 3.1% year-on-year. Along with June 2023, that was the joint-lowest reading since spring 2021. AJ Bell analysts believe a cooling in inflation and a soft economic landing will see the Federal Reserve pivot to cutting interest rates.

They expect Fed chair Jay Powell and his colleagues to sanction a first one-quarter point rate cut as soon as March and press on with up to five more by Christmas, to take the Fed Funds Rate to 4% from its current mark of 5.5%.

City Diary

Tuesday 9 January

  • Full-year results from Shoe Zone
  • First-half results from Games Workshop
  • Trading update from B&M European Value Retail
  • BRC UK retail sales index
  • German industrial production
  • EU unemployment rate

Wednesday 10 January

  • Trading updates from Sainsbury’s, Persimmon, Greggs, Nichols and Hunting

Thursday 11 January

  • Trading updates from Marks & Spencer, Tesco, Whitbread, Taylor Wimpey, Robert Walters
  • US inflation and unemployment claims

Friday 12 January

  • Trading updates from Vistry and John Wood
  • UK manufacturing, construction and industrial output
  • Chinese inflation

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