Weekly outlook: Will Next's recovery continue?

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24 March 2023

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Monday 27 March

– Full-year results from Belvoir Group
– Trading statement from bid target Hyve
– German Ifo industrial sentiment survey
– In the US, quarterly results from BioNTech and Carnival

Tuesday 28 March

– Full-year results from Wood Group, S&U, Petershill Partners, Team 17 and James Fisher & Sons
– Full-year results from AG Barr

The latest figures showed soft-drink manufacturer AG Barr’s revenues are expected to climb roughly 15% on a like-for-like basis, reaching around £315m for the year, said Aarin Chiekrie, an equity analyst at Hargreaves Lansdown. Chiekrie added: “The group is hoping cost-cutting measures and price hikes can keep a lid on inflated costs. This should help to deliver a solid profit performance next week, with many analysts forecasting a pre-tax profit of almost £43m.

“Barr has been pursuing non-organic growth opportunities as part of its growth strategy. These have been focused on the faster-growing areas of the industry, like oat milk producer MOMA, and more recently, the energy drink brand Boost. While these acquisitions should help growth in the long term, they’re likely to weigh on margins initially.

“There are plenty of other headwinds to face too, including revenues that come almost exclusively from the UK region. While revenues have been robust so far, this lack of diversification is a big risk. There will be a close eye on whether there are any early signs of weakening demand in the region.”

– Half-year results from Micron Technologies

Silicon chips are a good guide to global economic health, owing to their ubiquity, and global sales are expected to top $600bn (£491bn) in 2023, setting a second consecutive all-time high.

However, the Mould and Hewson said disappointing earnings, cuts to capital investment budgets, ballooning inventories, and fears of a recession have all weighed heavily on the sector recently.

Idaho-headquartered Micron Technology has been similarly hindered, and its shares are way down on their peak in late 2021. The memory-chip specialist saw revenues and profits begin to take a tumble in 2022’s June-August quarter, according to Mould and Hewson.

“CEO Sanjay Mehrotra unveiled a 23% quarter-on-quarter drop in sales and a halving of operating profit for that final quarter of Micron’s last fiscal year, and the first quarter of the new one was a shocker,” they said.

A combination of slower end demand and rising inventory has forced Micron to cut guidance for the second quarter to the end of February.

“Analysts and shareholders looking for good news will note that current consensus forecasts assume that the quarter just ended will see the bottom for sales, and that Q3 will see an uptick. However, the need to work down inventory means that quarterly net losses are expected to run at around $1bn (£820m) all the way through Q2, Q3 and Q4 – ultimately an epic bust to follow the epic, stimulus-fuelled boom of 2020-2021.”

– Trading statements from Ocado and United Utilities
– US Case-Shiller house price index
– US Conference Board consumer confidence
– In the US, quarterly results from Lululemon Athletica, Walgreen Boots Alliance and spices to condiments group McCormick

Wednesday 29 March

– Full-year results from S4 Capital, Michelmersh Brick, Central Asia Metals, Essentra, Strix and Xaar
– Full-year results from Next

Shares in the multi-channel retailer are up 8% over the last 12 months, helped largely by a strong recovery from October’s lows, and a better-than-expected trading statement after the Christmas period. According to Hargreaves Lansdown’s Chiekrie, in the nine weeks to 30 December, full-price sales were up 4.8% on last year, with retail sales driving most of the uplift. This impressive festive trading led the group to upgrade its full-year profit guidance by 4.5%, now expected to come in at £860m when the group reports on Wednesday.

Mould and Hewson said that analysts will look to the sales mix. The pair pointed out that in those nine weeks to the end of December, online full-price sales rose just 0.2% year-on-year, while retail grew by 12.5% as shoppers took the chance to go into a store.

“Financing interest income rose by 5.8%. Higher interest rates may have helped income in the last-named, although it will be interesting to see if the company flags any increase in bad debts if shoppers are having to rely more heavily on credit to make their purchases,” they added.

Hargreaves Lansdown’s Chiekrie concluded investors should not lose sight of the challenges ahead: “To cope with rising costs, Next is raising prices. With the group set to pass on 6-8% cost inflation, there is a question mark over whether consumers can stomach these hikes. If not, we could see sales drop. The group’s position as a middle-of-the-road retailer means its customers could slide down the value chain rather than fork out a little more.”