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The Week Ahead: US non-farm payrolls; Bed Bath & Beyond results

Read our pick of the top stories to look out for this week (28 June-2 July), and view our key company earnings schedule.

Michael looks back at the recovery in the markets, and ahead to the importance of the June non-farm payrolls report.

Dixons Carphone full-year results

Wednesday: When Dixons Carphone posted first-half profits of £45m in December of last year, it was a remarkable turnaround from the losses of £86m 12 months previously. Even with a lot of its stores closed due to the pandemic, the company’s online sales rocketed 145%, while same-store sales also rose 16% despite the various lockdowns. 

In January, Dixons Carphone reported further strong online sales growth, with its Greece business seeing a 366% rise. Mobile phone revenue has remained a laggard, however this isn’t a surprise given the decision to close all 531 standalone Carphone Warehouse stores. Additional pandemic costs saw the company spend £155m in various safeguarding measures. In April, the company took the decision to reimburse all government support for the £73m of furlough paid to UK and Ireland employees during the year. 

Online sales revenue is expected to more than double to £4.5bn for the year, with group electrical like-for-like revenue growth estimated to rise by 14% year-on-year. After the cost of repaying government support, management expect full-year adjusted profit-before-tax to come in at £151m. In May, the company said it would be rebranding to Currys plc by October this year.   

Stagecoach full-year results

Wednesday: While the plight of the airlines has dominated the narrative around the pandemic over the last 12 months, there has also been a significant impact to rail and bus operators as well. Stagecoach shares have seen some decent gains in anticipation of a reopening in the third quarter of this year, but are still trading well below where they were at the beginning of 2020. Having to tap government funding to continue to run a good proportion of its services due to lack of passenger income, the company reported profit-before-tax of £400,000 in the first half of its fiscal year, down from £66.6m a year before. Revenues were lower as well, down to £454.6m from £800.2m. Management said the ability to generate a profit was down to a combination of cost control as well as government and local council support measures.

The lockdown measures of the last six months are likely to have had an even bigger effect on second-half revenues than they did in the first half. In February, Stagecoach extended a £300m government loan for up to 12 months due to uncertainty over when transport was likely to return to normal. Wednesday’s full-year numbers aren’t likely to paint much of an improvement on the first half, but as we look ahead to the next 12 months, maybe management will be able to paint a more positive outlook.

UK Q1 GDP 

Wednesday: This week’s final iteration of UK GDP could see an upward revision to the interim -1.5% contraction seen in the most recent numbers. The reason for this expectation is largely down to the 1.5% expansion in March monthly GDP, which saw the UK economy accelerate from a 0.4% expansion in February. At the beginning of the year there was a real worry that the economic contraction would probably be of the magnitude of about -4%, given that it was made very clear that the lockdown was likely to endure for all of Q1, however the worst-case scenarios haven’t played out, and while the UK economy will have contracted in Q1, the recovery since January has been much better than expected. Ahead of the end of lockdown on 12 April, a lot of UK businesses used March as the time to prepare for the big unlock at the beginning of Q2.

US consumer confidence (June)

Wednesday: US consumer confidence has seen quite a rebound in the last few months, from lows of 88.9 at the beginning of the year to 117.5 in April, in the aftermath of the March stimulus payments that arrived on US doormats in April. While the recovery in sentiment has been impressive, it's only being intermittently reflected in consumer spending, with retail sales underperforming in May, declining 1.3%, though we did see some improvements in March and April of 10.7% and 0.9%. Nonetheless, while the US economy is improving, sentiment still appears to be fragile, with rising gasoline prices acting as a brake on demand due to supply disruptions caused by the recent cold snap, and the shutdown in the Colonial pipeline, which saw some US stations run out of gasoline.

Bed Bath & Beyond Q1 results

Wednesday: Earlier this month Bank of America, along with several other brokers, withdrew its rating of Bed Bath & Beyond, admitting it was no longer trading in line with its fundamentals. Despite the fact that a lot of US companies could fall into that category, Tesla and Uber being obvious examples, it was nonetheless a revealing observation of how the WallStreetBets saga has led to increased volatility in some of the more heavily shorted parts of the US market. 

Bed Bath & Beyond has been in difficulty for some time, and in its most recent numbers the company announced a 16% decline in Q4 net sales to $2.62bn, due to the closure of its store real estate. On the plus side, online sales rose 86%, however that wasn’t enough to offset the decline of in-store sales. The company is still in the middle of a restructuring process, however it did forecast that Q1 net sales were expected to see an increase of 40% year-over-year. The retailer said it expects to spend $250m over the next three years to remodel 450 of its existing stores, as well as launching several new private label brands this year to drive people to its stores. Profits are expected to come in at $0.09 a share.

Constellation Brands Q1 results

Wednesday: The lockdown closure of bars, pubs and restaurants has hit sales across all Constellation's brands, even accounting for increased sales from supermarkets, off-licences and liquor stores. The company is also behind Corona beer, which initially saw sales fall over its name association with the virus, but where sales have since recovered. 

In Q4, the company saw decent growth in its beer portfolio with 16% growth, up from 12% in Q3. This is expected to slow a little in Q1 to about 8%, with the company also hoping to start reaping dividends from its stake in Canadian cannabis company, Canopy Growth, which saw a loss of $0.12 a share in Q4. Constellation also beat expectations on revenues and profits in Q4. In April, the company outlined that it hoped to achieve 2% to 4% in net sales growth for the beer and wine segment for the new fiscal year. Current consensus estimates are for profits of $2.40 a share for Q1.

Associated British Foods Q3 results

Thursday: When ABF reported its first-half numbers in April, shares fell sharply after big losses in its Primark business. Why this was a surprise to investors though is puzzling. It shouldn’t be a secret that with its stores closed and no online operation, sales would suffer, and so it proved. On the plus side, its other businesses performed better than expected. In the first half of this year revenues in grocery, sugar, ingredients and agriculture were all higher than last year, with groceries up 9%, sugar up 1%, ingredients up 2% and agriculture up 8%, while profits in all four were also higher. This helped soften the blow of a 41% decline in retail revenue and a 90% decline in profit, as all Primark stores were closed. 

For the business as a whole, group revenue declined 18% to £6.3bn, while profit-before-tax halved to £319m. With all stores having reopened on 12 April, management expressed optimism for Q3 that some of this lost revenue can be caught up with record sales reported since the 12 April reopening. In a further sign of confidence, management also announced they would be returning the £121m  government job retention scheme money, while also proposing an interim dividend of 6.2p per share, at a cost of £49m. With recent retail sales data also showing a big rebound in clothing sales, Primark may have captured a good proportion of this over the last few weeks.

France/Germany manufacturing PMIs (June)

Thursday: Both France and Germany’s manufacturing sectors have been very resilient in the face of the restrictions that have been in place for most of this year, and that have held back services activity across the bloc. They’ve been extremely strong over the last two to three months, with German manufacturing posting levels in the mid-60s and France’s figures hitting a high of 59.4 last month. This outperformance, along with Italian and Spain manufacturing also joining the party with 62.3 and 59.4 in May, is expected to continue in June. 

UK manufacturing PMIs (June)

Thursday: In May, the reopening of the UK economy took another leg to the upside, building on the resilience in April's data, as optimism rose over a Q2 economic rebound that continues to gain traction. The May UK composite PMI hit a record high, along with prices paid, showing that while prices are looking a little on the hot side, they aren’t for now acting as a brake on economic activity in Q2.

The manufacturing sector appears to have been leading this rebound, however as the recent ONS industrial production and manufacturing figures for April showed, a decent PMI number doesn’t always translate into positive economic activity, with declines in both of the readings from these official numbers. In May, manufacturing activity hit a record high of 65.6, with a lot of UK companies reporting higher demand for both goods and services, which in turn was seeing some cost-push inflation.

The jobs market was also looking good, with firms being encouraged to take on extra staff at a rate not seen in over three-and-a-half years. All in all, optimism was high, with the only question being whether it's sustainable. Thursday's June numbers are expected to slow slightly, with the extension of some restrictions into July prompting a bit of a drop off. 

Walgreens Boots Alliance Q3 results

Thursday: Having reported better-than-expected results in Q1 with an increase in revenue of 5.7% to $36.31bn, and profit that also beat expectations at $1.22 a share, Walgreens repeated the same trick in its Q2 numbers at the end of March, with revenue of $32.8bn and profits of $1.40 a share. Walgreens also raised the full-year forecasts to mid-to-high single digit growth in EPS. This outperformance was driven by the company being at the forefront of the US vaccine rollout plan due to its scale, which has enabled the US government to make jabs available to a lot more people and on a much quicker basis, filling 288.5m prescriptions in the process. This means more footfall through its stores and as is the case with other retail providers of vaccines, anyone looking to get vaccinated at a Walgreens store has had to open an account. This in turn allows the company to target various ads with the user data. UK sales also saw an increase of 3.2% in Q2, with the expectation that Q3 will be equally as resilient. 

US non-farm payrolls (June)

Friday: It wasn't on the scale of the miss in April's non-farm payrolls, but nonetheless it spoke to a US jobs market which is struggling to add jobs at the rate that was expected back in March. Vacancies are also soaring, with over 9 million jobs unfilled. The problem appears to be the enormously generous boost to unemployment benefits as a result of the March stimulus package, which meant in a lot of cases it hasn’t been worthwhile returning to the labour force. This year the number of jobs added back has been 166,000, 468,000, 770,000, 278,000, and 559,000 in May.

While some states are now starting to remove these benefits, US jobs growth is likely to underperform until they expire in September, even as vaccination rates increase and the US economy reopens. This could raise concerns about the prospect of wage inflation as employers attempt to entice workers back into employment, by raising salaries. While this may work on some level, until the US economy has completely reopened, the jobs market may struggle to return to normal and inflation could also start to rise sharply. Friday’s June payrolls report is still likely to show a decent increase in hiring, with around 620,000 jobs set to be added, while the unemployment rate is expected to slip back to 5.7%, from 5.8%.

The ADP jobs report is expected to show a slowdown from the bumper 978,000 in the May numbers, with 480,000 jobs predicted to be added back. We also need to keep any eye on weekly jobless claims, which appear to be levelling out around 400,000. A wider concern is the participation rate, which has remained stubbornly weak, slipping back to 61.6% in May and well below pre-pandemic levels of 63.4%. There appears to be a lot of head-scratching going on about the lack of a rebound in this indicator, raising the prospect that many people may have retired early, or left the workforce. 

Index dividend schedule

Dividend payments from an index's constituent shares can affect your trading account. See this week's index dividend schedule.

Selected company results

Monday 28 June Results
Herman Miller (US) Q4
Petrofac (UK) Q2
Tuesday 29 June  Results
AeroVironment (US) Q4
D4t4 Solutions (UK) Full-year
Enerpac Tool Group (US) Q3
FactSet (US) Q3
Wednesday 30 June Results
Bed, Bath & Beyond (US) Q1
Constellation Brands (US) Q1
Dixons Carphone (UK) Full-year
Franklin Covey (US) Q3
General Mills (US) Q4
Schnitzer Steel Industries (US) Q3
UniFirst (US) Q3
Thursday 1 July Results
AO World (UK) Full-year
Associated British Foods (UK) Q3
Micro Focus (UK) Half-year
Polar Capital (UK) Full-year
Simply Good Foods (US) Q3
Stolt-Neilsen (UK) Q2
Walgreens Boots Alliance (US) Q3
Friday 2 July Results
No major results scheduled  

Company announcements are subject to change. All the events listed above were correct at the time of writing.


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