Evidence of UK consumer resilience, but weaker employment trends

Macro & Overnight

FOMC member Mary Daly raised hopes of smaller future rate increments as hopes rise of inflation trending down swiftly.

Supporting this view is a marginally weakening US$.

However, she and other Fed officials repeated that rates would rise to or above 5% and stay there for a long time.

This see-sawing game of second-guessing can go on for a long time, conceivably for the rest of this year.

Not all investors concur with our proclamation last week that the Fed Put is dead.

UK Company News

There is a slew of UK company reports out today. Generally, consumer-facing companies report performance in line with or ahead of guidance, including reassurance over cost containment. 

Online white goods supplier AO World’s unscheduled trading update increased profit guidance for the year to March 2023. UK revenue continues to align with the Board’s expectations. However, actions taken to reduce costs are gaining traction. 

AO’s smaller competitor Marks Electrical also updated, indicating that the company is on track to achieve its full-year targets, helped by continued focus on cost control and disciplined working capital management.

Discount greetings card retailer Card Factory upgraded guidance in its trading update. The company saw strong Christmas trading driven by improvements in-store transactions and average basket values. The company has continued to manage inflationary pressures during FY23 successfully. It is hedged on energy costs until September 2024 and has a currency hedge for most of its FY24 requirements. Card Factory also demonstrated significant debt reduction.  

Women’s online fashion retail brand Sosander reported continuing strong momentum from H1. It confirms that the company continues to trade in line with market expectations, distancing itself further from the performance of the more prominent online fashion brands such as ASOS and Boohoo. 

Supreme, the fast-moving consumer products distributor, remains well-placed to meet market expectations for the year ending in March.

Churchill China, the supplier of ceramic products to hospitality markets worldwide, expects profit to be at the upper end of analyst expectations. Continued revenue growth in export markets and a strong UK market position derive from its ability to offer a high level of service. The company has managed the challenges of increased material and energy costs. The order book remains above normal levels.

High-flying data technology company Wandisco has announced another contract win. This time with a global telco company. The company benefits from large enterprise clients requiring tools to manage vast data sets that flow from the cloud to the edge allowing lower network latency and improved customer experience.    

Hobbyist supplier Games Workshop expect to report a record half-year sales performance led by a recovery in all channels. The company remains confident in the Warhammer hobby, business model and resilience. However, it continues to face external cost pressures. There has yet to be an update on the discussions with Amazon regarding the Warhammer film proposals announced last month. 

The much smaller models and collectables business Hornby saw Q3 sales ahead of the same period last year. As a result, cumulative group sales for the financial year are ahead of last year by 6%. However, sales are behind budget due to the challenging consumer economic climate, which will impact the FY. 

GlobalData, an industry intelligence provider, saw a strong performance throughout the second half, ahead of analysts’ expectations. The company has c.80% revenue visibility for FY2023. Management now expects profit to be materially ahead of current expectations.  

Impact Health Care, the care homes landlord, has agreed to a £56m acquisition of a portfolio of six new care homes. 

Online derivatives provider Plus500 expect results to be in line with guidance. This was achieved despite lower levels of retail activity across financial markets impacted by the World Cup. A new sponsorship partnership with the NBA Chicago Bulls supported its progress in N America. It is also developing a strategic position as a market infrastructure provider to deliver brokerage execution and clearing services for institutional clients. 

International recruiter Robert Walters reported strong trading but a weaker December. This confirms reports from others, including The UK Recruitment & Employment Confederation,  seeing fewer job openings and the fastest decline in new job openings since Q1 2020. 

Prognosticator