A strong finish on Thursday (10 January), with the index closing up 0.5% at 6,942.87, helped the FTSE 100 extend its gains so far in 2019. Year-to-date the index is up 3.2% amid hopes of resolution to US and China trade tensions and slower rate increases by the US Federal Reserve.
The beginning of next week is likely to be dominated by the latest Brexit developments with a draft deal set to be voted on by MPs on Tuesday (15 January). Next Wednesday (16 January) UK inflation figures are released and the market will be looking to see if the retreat in global oil prices in the final months of 2018 has had any impact. An update on US retail sales later the same day follows a series of recent profit warnings from prominent American retailers like Macy’s, Target and Kohl’s with the UK’s own official retail figures are published on Friday (18 January).
Retailers came heavily into focus this week as investors digested a slew of trading updates from the sector, particularly on Thursday (10 January) when a long list of household names reported on their Christmas trading. Supermarket giant Tesco (TSCO) beat estimates with a 2.2% rise in UK like-for-like sales over the key Christmas period. Analysts had forecast a rise of 1.0% to 1.5% for the six-week period to 5 January and Tesco’s performance in non-food categories such as clothing and general merchandise was ahead of its competitors and the market. In contrast, shares in Marks & Spencer (MKS) came under pressure as it revealed that like-for-like sales in the third quarter were down 2.2% against analysts’ estimates of a 1.6% fall. Food sales were down 2.1%, an improvement on the second quarters drop of 2.7% and slightly ahead of forecasts, but clothing and home sales disappointed with a 2.4% fall.
Auto and cycling products retailer Halfords (HFD) reported weak third quarter like-for-like sales and cut its full year pre-tax profit forecast blaming weak consumer confidence. It now sees profit in a range between £58m and £62m against the previous consensus estimate of £72m. Troubled department store owner Debenhams (DEB) confirmed its full year earnings target despite a dip in sales over Christmas. Like-for-like sales for the six weeks to 5 January were down 3.4% with lower in-store takings offset by better online trading.
A lot of the focus will be on the crunch vote on Theresa May’s Brexit deal next Tuesday (15 January). MPs are widely expected to reject the agreement, with the Government now compelled to come back within three days with a ‘Plan B’. If the Prime Minister was to rule out a ‘no-deal’ Brexit at this point, then it could prompt a relief rally in both sterling and the UK stock market.
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14 January – In recent history JD Sports (JD.) has been a star of the retail sector delivering stronger revenue and profit growth than the majority of its peers. This Christmas update will see if this positive trend has been sustained over the festive period. There may also be an update on the integration of its acquisition of Finish Line in the US.
17 January – A third quarter trading update from Whitbread (WTB) will be the first since the completion of its sale of Costa Coffee to Coca-Cola. The company is likely to announce details of a share buyback programme part-funded by the £3.9bn derived from the deal. It will mean a lot of focus on the performance of its remaining businesses, including the Premier Inn hotel brand.
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