BANNER UP
Final summer time’s historic Brexit referendum continues to play havoc with retail circumstances within the UK. Revenues on the excessive road and in our on-line world have cooled due to a deadly cocktail of galloping inflation; stagnating wages; and falling client confidence.
And the newest buying and selling replace from John Lewis earlier this week urged that issues might be about to get even worse. The division retailer big noticed pre-tax earnings barrel 53% decrease within the six months to July, to £26.6m, as inflationary pressures and political uncertainty smacked shopper urge for food.
John Lewis chairman Sir Charlie Mayfield definitely would not count on circumstances to enhance any time quickly, and commented that ‘we count on the headwinds which have dampened client demand and put strain on margins to proceed into subsequent 12 months.’
Ocado Group
The retailer’s spooky assertion ought to come as specific fear for upmarket grocer Ocado Group. John Lewis additionally owns premium grocery store chain Waitrose, the place working revenue declined 17.four% in February-July because it battled elevated prices and endured sluggish gross sales growth -- like-for-like revenues rose simply zero.7% within the half 12 months.
Allied to the pressures created by shrinking shopper spending energy, Ocado might additionally wrestle to maintain gross sales on an upward slope as competitors turns into fiercer within the British grocery store section, with Amazon’s takeover of Complete Meals threatening to be as disruptive because the entry of Aldi and Lidl over the previous decade.
Towards this backcloth Metropolis analysts count on Ocado to endure a 40% earnings stoop within the 12 months to November 2017. And this ends in a mega-high ahead P/E ratio of 248.9 instances.
The grocery big is about to launch third-quarter buying and selling particulars on Tuesday, September 19th, and given the chance of one other problematic replace (rising prices and falling basket sizes noticed half-year pre-tax revenue dip 9.four% to £7.7m, Ocado suggested again in July), I reckon now could be a sage time for traders to promote up.
Safestyle
The identical pressures on client spending would additionally encourage me to change out of Safestyle forward of subsequent week’s buying and selling assertion (presently slated for Thursday, September 21st).
Certainly, a sequence of market updates has already prompted the window and door producer’s share value to virtually halve in lower than 4 months.
In Might Safestyle warned that it anticipated earnings in January-June to retreat from the corresponding half in 2016 attributable to difficult market circumstances, and adopted this up in July by advising that full-year earnings may additionally fall wanting prior expectations attributable to ‘risky’ buying and selling.
And Safestyle compounded investor distress earlier this month when it declared that ‘the group's order consumption has declined past the board's expectations’ for the reason that summer time replace, a state of affairs which it put all the way down to ‘an accelerating weak point out there ensuing from growing client warning.’ With the corporate additionally incurring further prices in an try to resuscitate orders, Safestyle stated that it anticipated earnings progress to show elusive within the present fiscal interval.
However given the regular deterioration in buying and selling circumstances, I consider this prediction is also set to fall and probably as quickly as this coming week.
The Sq. Mile’s military of analysts expects earnings at Safestyle to stoop 22% in 2017, leading to a potential P/E score of 10.9 instances. Whereas that is low-cost on paper, it's not low-cost sufficient to encourage me for one to speculate proper now. I reckon traders ought to be ready for extra ache as additional forecast cuts are fairly seemingly within the close to time period and past.
BANNER DOWN
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