The Week Ahead: ECB Rate Meeting, US Non-Farm Payrolls; Halfords, Zoom Results

Watch our week ahead video preview, read our pick of the top stories to look out for this week (1-5 June), and view our key company earnings schedule.

Michael reviews the week's price action and US-China tensions, and looks ahead to this week's US non-farm payrolls report for May, the ECB rate meeting and global services PMIs. On the earnings front, Michael previews Halfords and Zoom and wonders whether they have benefited from a lockdown boost. He also looks at the key levels on FTSE 100, DAX, S&P 500, EUR/USD, GBP/USD and AUD/USD.

Ted Baker (LON:TED) full-year (FY20) results

7am, Monday: As if Ted Baker’s problems weren’t bad enough, given the Hong Kong protests last year, the company has issued several profit warnings over the last 12 months. It also had to write down the value of its stock by over £20m at the end of last year, and just when you thought things couldn’t get any worse, coronavirus has hit retail sales across the world. Ted Baker’s share price is already down over 90% from its peaks, and with little hope of a pickup in consumer demand, its near-term prospects could be bleak. It has managed to raise £78.75m by selling Big Lobster, which owns the group’s registered head office in London, with the £72m cash proceeds being used to pay down debts, when the sale and leaseback is completed in June. The one upside is that its store footprint is narrower than some of its peers, and the business-rates holiday will also help on margins, though it won’t help much if consumers stop spending. Guidance for full-year, pre-tax profit is expected to come in between £5m and £10m.

Reserve Bank of Australia rate decision

5.30am, Tuesday: With economic lockdowns slowly being lifted, it’s unlikely that the RBA will do anything other than sit on its hands for this meeting, at a time when the Australian government has announced a new three to five-year jobs programme, called ‘JobMaker’. This appears to be a reaction to the latest unemployment numbers, which jumped to a five-year high of 6.2% after the loss of 600,000 jobs in April. With a number of central banks debating the prospect of negative interest rates, and Australian rates at a record low of 0.25%, there has been some discussion about the possibility of it happening in Australia. RBA governor, Philip Lowe, appeared to rule it out in a recent speech, however it doesn’t mean the RBA won’t give the green light to more quantitative easing.

Halfords FY20 full-year results

7am, Tuesday: It’s fortunate that Halfords doesn’t just rely on its automotive and servicing business for its revenue, in the wake of the government lockdown across the UK. Classed as an essential business, it has remained open and even seen an uptick as people either look to purchase a bicycle to avoid public transport, or get their bicycles out of storage and make use of the good weather as part of their daily exercise during the lockdown. At the beginning of May, Halfords said that its full-year results would be boosted by increased sales during the lockdown, which would push profit up to £50m to £55m. Despite this, the company still pulled the dividend, saving £24m, and suspended its guidance for 2021. Halfords should also benefit from the suspension of business rates.

Dick’s Sporting Goods Q1 FY21 results

Pre-market, Tuesday: The decision just over a year ago by Dick’s Sporting Goods to ban the sale of guns, in response to a spate of mass shootings, helped the business to post one of its best annual performances in recent times. In Q4 the company ended the year with net income of $69.8m and a profit of $1.32 a share. The company also said it would be taking a $48.8m restructuring charge for the removal of the hunt category from another 440 of its stores in 2020. Despite the threat of boycotts from angry gun owners, the company said it was still keeping the category in rural areas where it was needed. The e-commerce side of the business once again outperformed with an increase in sales of 15%, driven largely by clothing and footwear sales, which in turn saw the company raise the dividend up nearly 14%. As we look to 2021, it’s unlikely that Dick’s will be able to repeat last year’s feat, given the US economy shutdown for much of the last quarter, and which saw Dick’s close its stores across the US on 19 March. Unlike a lot of its peers, Dick’s is underleveraged, with fairly decent access to liquidity of $69m in cash, and $1.36bn in credit. The shutdown is expected to see the company post a Q1 loss of $0.785, with stores slowly reopening during May.

Zoom Video Communications Q1 FY21 results

After market, Tuesday: Zoom has done pretty well since its IPO just over a year ago, when it priced at $36 a share with a valuation of $9bn. The biggest concern at the time was that the technology is easily replicable, but unlike its IPO peers the company is profitable, and has become much more popular in the face of the challenges facing businesses and people in terms of conducting meetings in a post Covid-19 world. In its S1 filing, the company showed a profit of $7.5m at the end of January 2019, on revenue of $330.5m, in the face of some pretty mediocre competition in the form of Webex and Skype. Last year revenue rose to $622.7m, pushing its market capitalisation up to a staggeringly high $44.3bn, as the share price rose above $180. This year, revenue is expected to rise even further to $917m, but Zoom is now facing concerns over privacy and security which could hit its numbers. Zoom’s success has also prompted its competitors to up their game, so the fledgling company could find life a little more difficult as time goes by, putting the current valuation under slightly more scrutiny among questions as to whether it’s sustainable.

Workspace Group full-year (FY20) results

7am, Wednesday: Real-estate investment trusts have had a rough time of it recently, although Workspace has sold its office space slightly differently over the last 10 years. . Focusing solely on small businesses, the Workspace enjoyed significant share price gains selling flexible office space, and short-term leases with superfast connectivity. The business was driven by a desire to cater for the diversity of one person start-ups to larger communal areas for slightly bigger businesses, with more sophisticated requirements. This business model took a huge blow from the lockdown however, and the coronavirus pandemic sent the shares down from record highs in February to six-year lows in the space of five weeks, as the company was forced to offer 50% rent reductions. It’s highly likely that revenue will be much harder to attain in this new social distancing world in the short to medium-term. With technology moving swiftly to home and remote working, there is likely to be far less demand for the type of workspace solution offered by this innovative company.

Global services PMIs (May)

Wednesday: After the horror show of the record lows in April’s services purchasing manager index (PMI) numbers, there is a widespread expectation of a rebound in May’s economic activity. This already appears to be borne out by the recent flash PMI numbers from Germany, France and the UK a few days ago, though the numbers are still pretty awful, and well below 50. The biggest worry remains Spain and Italy, who rely so much on tourism in their services sector, and whose recovery is likely to be slow and painful, as tourists stay away. The recent flash numbers from France, Germany and the UK improved from record lows in April to 29.4, 31.4 and 27.8 respectively. Spain and Italy are also expected to improve from their record lows of 7.1 and 10.8, but the numbers will still point to a sharp contraction in Q2.

ECB rate meeting

12.45pm, Wednesday: Much has been made of the recent German constitutional court decision to compel the European Central Bank to justify its rationale around its 2015 asset purchase programme. Senior ECB officials have shrugged off the judgement, saying that the ECB remains insistent it will do what is required to support the European economy. However, the judgement does raise serious questions around the legitimacy of its new PEPP programme, and its ability to do much more than it’s already doing now. The announcement of the €500bn European recovery fund by German chancellor, Angela Merkel, and French president, Emmanuel Macron, has generated a lot of headlines, but it still remains a work in progress, with no prospect of delivery before March next year, assuming it gets signed off by all EU members. The ECB has a mountain to climb if it wants to convince markets it can do much more than it already has, without further loud noises from the more hawkish EU members.

Slack Technologies – Q1 21

After market, Thursday: One of last year’s many IPOs, Slack is one tech stock that has managed to do well in the last few weeks, despite recent weakness in stock markets. Trading at well above its $26 a share IPO price, its last quarter was not well received by investors. The shares fell 20% despite a fairly decent growth update, as revenue rose to $181.9m, a rise of 49% from the same period a year before. The disappointment came from its targets for 2021, given that Slack still has a way to go before turning a profit, even though it’s going in the right direction on the revenue front. Investors felt that the company’s ambitions were too modest, with expected revenue for Q1 of $188.37m and a loss of $0.07 a share. Since that Q4 update and the subsequent move towards working remotely, the shares have undergone a renaissance, and like Zoom, expectations have been elevated to much greater levels, on expectations of much greater usage. Forecasts are still for a Q1 loss of $0.06 a share, but the future for Slack looks much more promising now than it did three months ago.

US non-farm payrolls & unemployment rate

1.30pm, Friday: Last month’s April non-farm payrolls report confirmed what most of us already knew – as a record number of Americans lost their job. When the final number was released, it came in slightly below expectations at 20.5m. Nonetheless, with the ADP (NASDAQ:ADP) number also added, it spelt out a sorry tale of economic misery for a huge number of people. Since then the weekly jobless numbers have continued to climb, pushing up to 40m people. Friday’s May non-farm payrolls report is also expected to be a multimillion number, and while it won’t be anywhere near the April number, each job loss will be felt equally as painfully, with another 7m jobs expected to be lost. The ADP payrolls is expected to shed another 9m jobs on the 20m number in April. This would take the total number of jobs lost over the last two months to over 50m, pushing the unemployment rate up from 14.7% close to an eye-wateringly high 20%.

Selected UK & US company announcements

Company announcements are subject to change. All the events listed above were correct at the time of writing.

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