Given the growing possibility of a no-deal EU exit and the implications this could have for consumer confidence, it’s fair to say that the numbers from major retailers will be coming under more scrutiny than ever before. Three such firms report to the market next month.
Pre-brexit boost? Kicking things off is Primark-owner Associated British Foods (LSE: LON:ABF) with the £18bn cap scheduled to issue a pre-close trading update on 9 September.
Back in July, it revealed a 3% rise in group revenue at constant currency while also saying that it expected “good profit growth” at its value-focused clothing business for the full financial year. Considering the recent spate of hot weather hitting the UK, I would be surprised if this wasn’t the case. Positively, the company also saw no reason to change its outlook with earning per share on par with that achieved in the previous year.
At 17 times earnings and offering a 2.1% dividend yield, Associated British Foods is neither cheap relative to some of its high street peers nor particularly attractive for income seekers. Nevertheless, the diversified business model does make it arguably more defensive than most, even if AB Sugar continues to underperform.
Next up on 10 September are half-year results from one of the newer entrants to the market’s premier division, namely sports fashion and outdoor brand purveyor JD Sports (LSE: JD). Those holding the company in their portfolios have had a superb 2019 so far with the shares rising 72% to date.
In its last announcement in July (coinciding with its AGM), the company stated that it had “continued to achieve encouraging like-for-like sales growth both in the UK and internationally”. Perhaps most importantly, JD’s management also said that headline pre-tax profit for the full-year would likely be “at least equal” to what analysts were predicting. Should it beat those expectations next month, expect the share price to continue rising.
JD’s stocks currently trade on almost 19 times forecast earnings making it relatively expensive compared to peers. Despite this, I think that’s still a reasonable valuation for such a quality outfit that generates great returns on the money it invests, has net cash and is rapidly opening new stores around the world. Those investing for income should probably steer clear though. JD is expected to yield just 0.3% in the current financial year.
Next up Completing our trio will be half-year results from Next (LSE: NXT) on 19 September. Like JD Sports, its shares have gone from strength to strength in 2019, rising 45% to date. And like JD Sports, I suspect there will be nothing for those already holding to worry about based on its most recent trading statement.
A little under a month ago, Next surprised the market by revealing a 4% rise in full-price sales over Q2 and that it was consequently more than doubling its guidance for the full-year to 3.6%. Although sales continue to fall in its stores, the £8bn cap is offsetting this through online growth, helped by its decision to sell clothing from other retailers such as Superdry. Again, given the recent great weather, expectations might even be exceeded next month.
At slightly less than 13 times earnings, Next is quite a bit cheaper than both JD and ABF making it the clear choice for bargain hunters. The 3% yield, easily covered by profits, is also the highest of all three.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019