As we move into the new calendar year, information is going to start flying thick and fast.
From a top-down perspective, one item to note will be the release of the so-called ‘Beige Book’ in
America on Wednesday 13th January. More formally known as the Summary of Commentary on Current
Economic Conditions, this document is published eight times a year by the US Federal Reserve
and it features anecdotal evidence on the American economy across the 12 Federal
Reserve bank districts. It can influence monetary policy and the next meeting of the Fed to discuss
interest rates will conclude with a decision on 27th January so that is a date for the diary.
Investors might also like to keep an eye open for two other datasets which are due for release
in the USA this week. datasets. They are
• The latest weekly unemployment claims data on Thursday 14th January
AND • And
the Job Opening and Labour Turnover Survey or the JOLTS on Friday 15th
The weekly unemployment claims figure peaked at 6.9 million in late March
as the pandemic hit America and lockdowns were imposed.
Thankfully it come down a long way since, but the number of new claims seems to have
stopped improving and the December 26th figure of 787,000 new claims is your benchmark here.
The JOLTS survey helps to measure job vacancies. As you might expect,
the more vacancies an economy is creating the stronger it is likely to be – and
vice-versa. The number of vacancies crashed to 266,000 by May of last year only to rally
to 336,000 by October, so it will be interesting to see what November brought,
especially as the pandemic really began to make its presence felt Stateside in that month.
On the home front, we have a busy week, as retailers in particular will be updating
shareholders with comments on Christmas trading, although watch out for a few house
builders and the big recruitment agencies, too. Names which may be worthy of further
research include the following, although please note these dates are still subject to change:
• Abcam on Monday 11th January
• JD Sports, THG, Games Workshop, DFS, Vistry and Robert Walters on the 12th
• ASOS, Sainsbury, Just Eat Takeaway.com, Persimmon and PageGroup on the 13th
• And Primark-owner Associated British Foods, Boohoo, Dunelm and Halfords will be the retail
names in the frame on the 14th, while other names to note will be Hays and Taylor Wimpey
But the company most likely to cause a fuss in the week ahead is Tesco. The grocer is scheduled
to release its third-quarter sales figures and a Christmas trading update on Thursday 14th October.
Given how heavily the UK has relied on its single biggest grocer this year, thanks to the
pandemic and the lockdowns – Tesco’s market share is almost 27% according to consultants
Kantar Worldpanel - you might be surprised to learn the shares are actually down by 8-9%
over the past year, although this is still better than the FTSE 100 overall.
This does however follow a similar pattern at rivals
Morrisons and Sainsbury for what I would guess are similar reasons:
• First, Tesco has lost market share over the past year,
albeit only three-tenths of a percentage point, in what remains a fiercely competitive market.
• Second, the market might be about to get fiercer still, as Marks & Spencer teams up with Ocado,
Morrisons cements its relationships with Amazon, Aldi starts to offer click-and-collect and
delivery services and Amazon prepares to offer delivery services to its Prime service customers.
• Finally, the pandemic means that volumes and sales have gone up but so have COVID-related
costs, by some £725 million at the company’s last count, so the overall benefit to profits
may turn out to be pretty limited, for all that the nation is grateful to Tesco and its staff
for their help during these trying times. In addition, Tesco noted back in December
that it would repay £585 million in Business Rates Relief to Her Majesty’s Government.
Tesco does not usually publish profit or cash flow
figures alongside its Christmas update so attention will really focus on the
like-for-like sales growth figures for the third quarter and the year overall.
At the first-half stage, like-for-like sales growth was
• 6.8% across the company as a whole • 8.5% in the UK and Ireland
• While sales fell 1.5% at the Eastern European operations and by nearly a third at Tesco Bank
Analysts will look for any more granular detail that chief executive Ken Murphy feels able offer.
Remember that at the first half stage, there were some big shifts in business mix:
• In retail, online sales were up 69%,
convenience store sales by nearly 8% and large format stores were up just 1.4%
• Food sales were up 9% and everything else was down
• While at wholesaler Booker, retail sales were up 23% and catering sales down 41%
Above and beyond such nitty-gritty, analysts and investors will look for an update on the sale of
the Thai, Malaysian and Polish operations. The Asian disposal received local regulatory
approval in December to clear the way for a £5 billion, 51p-a-share special dividend payment,
providing shareholders give their approval at a specially convened meeting.
The Polish deal is due to close in spring and could yield around £300 million in cash all in.
Both Asia and Poland will be treated as discontinued segments in these results.
Finally, analysts will be watching for any change to management’s profit guidance for the
fiscal year that ends in February 2021. The last published consensus for stated pre-tax profit was
just under £1.4 billion, a small improvement on the prior year, although that was dated November
on the company’s website, and Tesco has agreed to repay the business rates relief since then.
I hope that you and your families are all in good health and good spirits during these
difficult times. Thank you for listening and I look forward to talking to you again next week