Earnings This Week: Sainsbury’s, Currys and Persimmon

All the attention is on the UK corporate calendar this week as markets brace for the US earnings season to get underway later this month.

Trader 3

Corporate earnings calendar: July 4-8

This is one of the quietest weeks of the quarter in terms of results over in the US, as markets brace for the start of earnings season on July 14. Notably, US stock markets are closed on Monday for the Fourth of July. Jeans maker Levi Strauss is the one to watch with second quarter earnings out on Thursday.

That pushes the focus over to the UK, where Sainsbury’s will provide a trading update at a tough time for supermarkets that are striving to keep prices low for consumers as food costs continue to soar. Meanwhile, Jet2 will provide an insight into the airline industry that is grappling with labour shortages, and we will also see updates out from housebuilders Persimmon and Vistry.

Tuesday July 5

Sainsbury's Q1

Thursday July 7

Currys FY

Jet2 FY

Entain Q2

Persimmon H1

Levi Strauss Q2

Friday July 8

Vistry H1

 

Sainsbury’s

UK supermarket chain Sainsbury’s will report a first quarter trading update this week and markets are bracing for bad news. The industry is striving to keep prices down for consumers as food inflation continues to rise, and at a time when it is facing supply chain disruption and labour shortages. Price has been the main weapon of choice for most supermarkets ever since German discounters Aldi and Lidl disrupted the market, but this will intensify this year as customers become more cost-conscious. CEO Simon Roberts has already revealed that consumers are making more trips but buying smaller baskets and there have been other notable shifts in behaviour such as increased demand for frozen food and own-brand labels. He also warned consumers are likely to tighten their belts even further this autumn. That sets a cautious tone ahead of the update, when markets forecast Sainsbury’s will report a 7.4% decline in like-for-like sales, driven by a 3.1% fall in grocery and sharper drops in clothing (-8.7%) and general merchandise (-13.5%). Investors will be hoping that Sainsbury’s can reiterate its target of delivering underlying pretax profit of £630 million to £690 million over the full year and £500 million in retail free cashflow.

 

Currys

Retailer Currys benefited from a surge in demand for electronics during the pandemic but is now facing a potential slowdown in demand for computers, smartphones and other devices as consumers tighten their belts and fears of a recession grow. Analysts forecasts Currys will report a 5% fall in annual revenue to £9.83 billion and a 2% drop in adjusted pretax profit to £152.9 million. Notably, that is below the goal set by the company back in January that said profits would exceed £155.0 million. It has said it should have ended the year with at least £100 million in net cash and investors will be keeping an eye on cashflow. Analysts hope the international arm can help offset any weakness in the UK, where consumers seem to be being squeezed more financially. Over the medium-term, Currys is aiming to deliver £1 billion in cumulative free cashflow between the 2019/20 to 2023/24 financial years and for its adjusted Ebit margin to hit 4% by the end of that period. Ian Dyson, the former chairman of fast-fashion firm ASOS, will takeover as chair of Currys in September.

 

Jet2

Low-cost airline Jet2 reports full year earnings this week, and the focus will be on how this summer is shaping-up amid a turbulent time for the industry that is grappling with labour shortages and other headwinds. The company said summer bookings were 14% ahead of pre-pandemic levels when it released its last update in April, although a lot has changed since then. The fact it has hedged 95% of its fuel for this summer and its own cash balance sits at over £1 billion installs some confidence Jet2 can weather any storm. Jet2 has said its annual loss before tax and foreign exchange revaluation will be between £378 million and £383 million compared to the £373.8 million loss seen the year before. That is despite a surge in revenue, with analysts forecasting sales rose to £1.29 billion from just £395 million when the pandemic was plaguing the industry last year.

 

Entain

Bookmaker and gambling outfit Entain will release a post-close trading update ahead of interim results covering the first six months of 2022 that will be released sometime in August. This will focus on net gaming revenue, which analysts believe grew 19.7%, and how the outlook is shaping up. Entain has not provided firm guidance for the full year and any fresh insight here would be welcomed by the markets. It has, however, laid out targets for its rapidly expanding US arm BetMGM, which is aiming to report annual net revenue of $1.3 billion this year and turn profitable at the Ebitda level in 2023. Expect an update on Dutch firm BetEnt, which it agreed to buy for an initial EUR300 million in June and should be completed in the second half, adding a new potential catalyst for the stock, which is down 26% since the start of the year and testing its lowest level since early 2021.

 

Levi Strauss

Levi Strauss, renowned for its denim jeans, will be the top US stock to watch this week as it releases second quarter earnings. Wall Street forecasts revenue will rise 12.4% in the second quarter to $1.4 billion and adjusted EPS is expected to jump 36% to $0.22. That will be impressive considering supply chain problems remain a headwind, although margins have also proven resilient and helped faster earnings growth. Investors will want to see Levi Strauss at least maintain its full year outlook, which is targeting 11% to 13% net revenue growth and adjusted EPS of $1.50 to $1.56, as the economic outlook continues to deteriorate.

 

Persimmon

Housebuilder Persimmon will provide an insight into what to expect from its first half results with a trading update this week. Analysts expect the company to have built 7,075 houses in the period, down from 7,406 the year before. Although average selling prices have risen, the drop in volumes is expected to see revenue fall 1.8% to £1.81 billion. Forward sales will also be under the spotlight as markets look for signs about how demand is holding up as consumers tighten their belts. Persimmon is looking to increase volumes by 4% to 7% over the full year, signalling things will improve in the second half. The company’s new chief financial officer Jason Windsor will take up his new role on July 11.

 

Vistry

Fellow housebuilder Vistry will also provide a first half trading update at the end of this week. The company has seen forward sales accelerate this year and margins have improved thanks to higher prices. This, it has said, will lead to a ‘significant step up in profits and returns in 2022’. In May, it said average weekly sales were some 15% ahead of the prior year and that prices continued to rise across the board. It said it has already sold 83% of the houses it plans to build in 2022 and said it remains positive going forward despite numerous headwinds. It has said adjusted pretax profit will be at the top end of market expectations, although we will have to wait for the detailed earnings to discover the final result.

 

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