It appears the city underestimated the power of an undisrupted Christmas to get Brits to open their wallets — at least that’s what you’d take away from Sainsburys’ and JD Sports’ updates this morning. Both companies said their Christmas periods were better than expected and both of them said their earnings would now be at the top end of expectations. Yet outside of festive bubble, things are not as positive — cybersecurity company Darktrace has been caught off guard by target customers cutting b
(Bloomberg) — It appears the city underestimated the power of an undisrupted Christmas to get Brits to open their wallets — at least that’s what you’d take away from Sainsburys’ and JD Sports’ updates this morning. Both companies said their Christmas periods were better than expected and both of them said their earnings would now be at the top end of expectations. Yet outside of festive bubble, things are not as positive — cybersecurity company Darktrace has been caught off guard by target customers cutting back and homebuilder Barratt has felt the impact of the grim UK market.
Here’s the key business news from London this morning:
In The City
J Sainsbury Plc: Britain’s second-largest grocer said it expects its profits to be towards the top end of its guidance range after its Christmas trading and third quarter were above the market expectations.
- Its like-for-like sales in the third quarter were up 5.9%, while its Christmas sales were up 7.1% compared to the year before
JD Sports Fashion Plc: The retailer said its sales for the Christmas period were “particularly impressive” with total revenue for the six weeks leading to the end of the year up more than 20%.
- The company also boosted its adjusted profit before tax to the top end of the market expectations
- It said its adjusted profit before tax for the next financial year will be just over a £1 billion
Darktrace Plc: The cybersecurity company cut its full year annual recurring revenue expectations after the impact of economic uncertainty on new customer growth was harsher than it previously thought.
Barratt Developments Plc: The homebuilder says there’s been a “marked slowdown” in the UK housing market, with political uncertainty, rapid changes in mortgage rates and dented homebuyer confidence all having an impact.
- The company said it might have to cut its home completions expectations if the usual seasonal improvement in sales doesn’t happen
- It says it has significantly cut its land approvals, paused recruitment and controlled new site openings all to manage its working capital
In Westminster
Britain’s health system will endure another crisis today as ambulance workers hold a second strike and the public is warned they may have to wait longer than usual for emergency services.
The Hong Kong government condemned a decision by UK Foreign Office Minister Anne-Marie Trevelyan to meet Tuesday with lawyers for the imprisoned media mogul Jimmy Lai, and accused the British government of interference in its domestic affairs.
Meanwhile, here’s a closer look at China’s State Administration of Foreign Exchange, which has an investing enigma in the heart of London.
In Case You Missed It
Budget frozen food retailer Iceland Foods is reducing the amount of chilled food it sells to try to lower the business’s energy bills.
Oxbotica, a British firm that develops autonomous vehicle software, has raised $140 million in a Series C investment round that included funding from BP Plc’s ventures arm, industrial technology firm Halma Plc and Tencent Holdings Ltd.
Finally, here’s the London suburb that kept booming as the working-from-home crowd seeks leafier climes.
Looking Ahead
Tomorrow will see the first really busy morning of the fresh earnings season. Here’s what to expect:
Tesco Plc’s retail adjusted operating profit guidance for the year will be in focus when the supermarket reports third-quarter results at 7:00 a.m. Britain’s No. 1 grocer trimmed the forecast in October to between £2.4 billion and £2.5 billion, cutting the upper end of a previous range that went as high as £2.6 billion. Any update will come after Tesco last week announced a price freeze on more than 1,000 products until April 10, extending a previous price lock which ran from October to the start of 2023.
Marks & Spencer Group Plc’s Christmas trading update should shed more light on whether the “sharper” positioning of its upscale food business propped up profit margins. But, even with a more aggressive pricing policy, there’s a risk to overall spending this year as “consumers have to make choices,” says Bloomberg Intelligence analyst Charles Allen. Investors will also pay attention to any strategic comments M&S may make with regard to its joint venture with Ocado Group Plc. A full integration of Ocado’s online grocery business with M&S stores could create a “viable new mainstream supermarket business, with a strong own-brand core,” Allen says, adding that such a move would need M&S to take 100% ownership of the JV, which doesn’t look imminent.
Asos Plc, due to give a first-quarter trading statement, has been hit by a “perfect storm of difficult pandemic comparisons, inflation and rising interest rates,” says BI’s Tatiana Lisitsina. Analysts expect Asos’s full-year adjusted pretax profit to drop by 58% to £9 million. Investors will also keep an eye on Asos’s talks with lenders, which it will need to take up again this year as recently extended terms on a £350 million revolving credit facility expire in 2024.
Persimmon Plc’s update will be closely watched for any impact on selling prices in the final quarter of 2022, as well as more detail on its outlook for this year. The company is focused on first-time buyers, who have been hurt more than home movers by higher interest rates and a cost-of-living crisis, say BI’s Iwona Hovenko and Susan Munden. This, together with build-cost inflation, may lead to narrower margins at Persimmon — but they’re still “peer leading,” the analysts add.
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