The Week Ahead: UK Unemployment, Retail Sales; Ashtead, Boohoo, Carnival Results

Watch our week ahead video preview, read our pick of the top stories to look out for this week (15-19 June), and view our key company earnings schedule.

Our UK chief market analyst, Michael Hewson, looks back at this week's sell-off in equity markets, and ahead to the latest Bank of England rate meeting, UK economic data, US and China retail sales, plus key technical levels on the FTSE 100, DAX, S&P 500, GBP/USD, EUR/GBP and Gold.

China industrial production & retail sales (May)

Monday: If the recovery from Chinese consumers is any guide, then it’s likely to be a long road back for the global economy more broadly, not that you would know it if recent stock market performance is any guide. The latest Chinese trade numbers showed that internal demand remained weak in May, while retail sales, despite showing an improvement, still remains much lower than the levels we’ve become accustomed to from the world’s second-biggest economy. Let’s not forget that this time last year, China retail sales grew at an average of 8% year-on-year. The last three months declined -20.6%, -15.8% and -7.5%, and while we are going in the right direction, the clear takeaway remains one of weak demand and a cautious consumer. Expectations are for a 2% decline for May, however if we are to get a rebound then now would be as good a time as any, with summer approaching. Industrial production is expected to remain steady at 5%, up from 3.9%.

UK ILO unemployment (April) & jobless claims (May)

Tuesday: As we saw in the recent US jobs report, the return of furloughed staff helped the US economy add back a lot of jobs in May. This sort of effect is unlikely to be seen in the latest UK unemployment numbers, which will probably see the effects of 856,000 jobless claims in April. This is likely to push the UK unemployment rate above 4.6%, after several months at multi-year lows. In terms of the weekly jobless claims numbers, while furlough schemes should take the edge off the amount of claims in the short term, we already know from the various companies announcing job losses that the UK labour market is likely to become much more difficult in the weeks and months ahead.

Ashtead Group (LON:AHT) full-year (FY20) results

Tuesday: Ashtead’s share price has seen an almost V-shaped rebound this year. After falling sharply from record highs in February, the share price collapsed in March, falling over 60%, before rebounding to recover all of its losses and trading back close to breakeven for the year. As a barometer of economic activity, this leasing and equipment rental company has a presence in both US and UK markets, and in March reported a pre-tax profit for Q3 of £225m, which is slightly down from the year before, though revenues were higher. At the end of April, the company issued a profit warning, with its US market expected to see a 15% decline in revenue as a result of the US shutdown. Profit is expected to come in lower at £1.05bn, while the company said it would be cutting capital expenditure from £1.2bn to £500m.

US retail sales (May)

Tuesday: After the surprisingly positive non-farm payrolls report, there is some optimism that US consumer spending could rebound in May, after three consecutive monthly declines. In April, retail sales slid a record -16.4%, although some recent retail reports have seen online sales break records across the board. This appears to have raised expectations for a positive figure as lockdowns get eased across the US, with a rebound of 6.3% predicted.

Boohoo Q1 (FY21) results

Wednesday: Boohoo (LON:BOOH) has had its share of ups and downs over the past few years, and this year’s share price moves haven’t been any different. The online retailer saw record highs in the share price in January, before a spectacular Covid-19 collapse to three-year lows, which was then followed by a recovery to new record highs last month. In an update from April, Boohoo said it wouldn’t be providing guidance for the rest of the year, even as it announced impressive full-year results for the year ended February 2020. Group revenue rose 44% to £1.235bn, with profit-before-tax jumping 54% to £92.2m. Revenues increased across all of its brands, with NastyGal rising 106% to £98.8m. The bulk of revenue still came through the Boohoo and PrettyLittleThing (PLT) brands, and it was this strength that probably helped play a part in last month’s decision to buy the remaining 34% of PLT it didn’t already own, for an initial £269.8m, rising to £323.8m if the share price holds above 491p over a six-month period. This decision came in the immediate aftermath of a short-selling attack from a fund called ShadowFall Capital, which alleged that Boohoo mis-stated its free cash flow for the year by £32bn, a claim which was swiftly refuted. The short-seller also claimed that the company was treating cash generated by PLT as though it owned the business outright, saying it could cost the company almost £1bn to buy the remaining stake. Boohoo’s purchase of that PLT stake helped put paid to that claim. Wednesday’s Q1 numbers follow a turbulent quarter, and could go a long way to putting another hole in last month’s short-seller claims, as well as reassure investors who have had quite a journey so far this year.

Berkeley Group full-year (FY20) results

Wednesday: UK housebuilders were another sector to bear the brunt of the coronavirus lockdown, though mercifully for Berkeley Group (LON:BKGH) it came towards their year-end, so will only affect the last six weeks of its financial year. In an update posted towards the end of March, management said profit was likely to come in around £475m for the year ended 30 April, while also withdrew its guidance. The intentions around the dividend remain a concern, and while the 31 March dividend was paid, the £140.1m dividend due on 30 September could come under threat if management decide that it’s too risky to pay out on, given the current climate. The return to work on construction sites means that the economic disruption to housebuilders has been limited, however even with Berkeley Group’s £1bn net cash buffer, operating costs will inevitably be higher in a post Covid-19 world, notwithstanding the disruption to group operations.

Bank of England rate-meeting

Thursday: We’ve heard a lot of chatter in recent months about the prospect of negative interest rates being a tool in the Bank of England’s monetary policy locker, with governor Andrew Bailey flip-flopping on the subject and saying that he was looking at it again. While that may be true, it’s clear that there is some nervousness about going down that route if recent comments from deputy governor, Jon Cunliffe, are any guide. He said that while negative rates were still being examined, the financial sector might experience “a great deal of pain”, a concession which suggests that the barrier to such a move has got that little bit higher. It’s also difficult to determine what more the central bank can do at a time when the unemployment picture isn’t clear because of mass furloughing of employees. If the economy continues its reopening process, the unemployment numbers may not be as bad as originally feared, and April’s -20.4% GDP economic contraction could signal the low point as the economy recovers.

Carnival (NYSE:CCL) Corp Q2 (FY20) results

Thursday: Earlier this month, Carnival found itself falling through the trap door of the FTSE 100, largely as a result of the huge declines in the share price over the last few weeks, as investors dumped shares over concern that the business might not survive a prolonged shutdown. The company has already shelved most of its 2020 cruise season as a result of the pandemic, though it does have plans to restart US operations on 1 August. Coming so soon after posting record profits at the end of last year, the change in outlook could not be starker. The company has a lot of questions to answer, not least how to restore customer trust after criticism for its handling of the outbreaks on board its ships. While 2021 bookings are looking good, Carnival biggest problem is cash flow – or lack of it – and with a huge fleet to maintain, the business is haemorrhaging cash at a rate of up to a $1bn a month. Carnival was able to raise $6.4bn in April to help tide it over, but is likely to have to cut jobs sharply in the coming months. Some 450 job cuts at its Southampton HQ have already been announced, with the prospect of further cuts unless lockdown restrictions are eased soon. Losses are expected to come in at $1.93 a share.

Kroger (NYSE:KR) Q1 (FY21) results

Thursday: One of the biggest grocers in the US, Kroger (NYSE:KR) is one stock that has had a good 2020 so far. Like most food retailers, it’s remained open, helping to keep US consumers fed. At its most recent earnings announcement, Kroger maintained its forecast for 2020, boosted by sales of its own high-margin private label brands, which boosted annual sales to $23.1bn in 2019. The recent deal with Ocado (LON:OCDO) has seen the business look to improve its digital presence in a market that currently has Walmart (NYSE:WMT) as the market leader, and where Amazon (NASDAQ:AMZN) is also making its presence felt. The Ocado tie-up appears to be going from strength to strength, with plans to build more highly-automated customer fulfilment centres. So far, plans have been announced for nine buildings, of which the first should be finished in Ohio in early 2021. Expectations are for Q1 earnings to come in at $1 a share, however in line with recent updates from Walmart and Target (NYSE:TGT), margins could be hit by higher costs as a result of Covid-19 contingency measures.

UK retail sales (May)

Friday: Not surprisingly, retail sales in April were a shocker, with a record decline of 18.1% as the economy locked down for the month. Coming on the back of a 5.1% decline in March and a weak February, it’s clear that consumer spending is likely to remain subdued for quite some time. We’ve already seen in the latest consumer credit numbers that consumers are paying down debt rapidly, and this is unlikely to change soon. Furloughed employees will be in no rush to go out spending, and with holidays this year proving difficult, consumers are likely to limit discretionary spending.

Selected UK & US company announcements

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

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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