Proactive Investors - JD Sports knocked by weak Adidas (ETR:ADSGN) outlook.
JD Sports (LON:JD) is down 2.9% after Adidas said 2024 operating profit would be below expectations.
The German sportswear manufacturer expects to generate an operating profit of around €500 million in 2024, less than half the €1.27 Bloomberg-cited consensus.
Adidas blamed negative currency movements for the profit shortfall.
The company plans to mitigate some of the damage by continuing to sell left-over inventory from its defunct Yeezy partnership with the rapper Ye.
This will boost 2023 operating profit as the firm will no longer write-down the value of the inventory.
The company cut ties with rapper Ye, formerly known as Kanye West, in October 2022 after he made antisemitic and other offensive remarks online and in interviews. It left Adidas holding €1.2 billion worth of unsold Yeezys.
Shares in Adidas are down 7.8% in Frankfurt.
FTSE flat ahead of BoE rate call
The FTSE 100 was little changed in early trading ahead of the interest rate decision by the Bank of England at midday.
At 8:15am, London’s blue-chip index was up 1 point at 7,632 while the FTSE 250 was down 0.7% at 19,230.25.
The UK’s central bank is widely expected to leave interest rates unchanged with the focus on any hints to the timing of a future rate cut.
Michael Hewson at CMC Markets said: “No changes are expected to monetary policy today with the main question being around whether our resident hawks decide to vote with the majority for no change and temper their hawkishness.”
“Of the 19 meetings Catherine Mann has voted in she has voted to increase the base rate at 17 of them so a hold will be a rare event for her.”
“There is also the possibility of a dovish outlier with the potential for Swathi Dhingra voting for a rate cut, prompting a split in the opposite direction to what we saw in December,” Hewson added.
In company news, BT rose 4.1% after reporting modest growth in third quarter revenue and adjusted earnings while Shell PLC rose 1.1% after launching a fresh $3.5 billion buy-back and better-than-expected fourth quarter profit.
Shell (LON:RDSa) launches new buyback as lower profit top City forecasts
Shell PLC (LON:SHEL) on Thursday launched a $3.5 billion share buyback, and boosted the dividend 4%, despite reporting a big drop in fourth quarter profit.
The FTSE 100-listed oil and gas producer said fourth quarter adjusted earnings were $7.31 billion, up from $6.22 billion in the third quarter, but down from $9.81 billion the year prior.
Shell said profit - which was around $1 billion above City forecasts - reflected a robust operational performance and strong LNG trading and optimisation results.
But the firm booked impairment charges and reversals of $3.9 billion and noted unfavourable movements due to the fair value accounting of commodity derivatives.
Cash from facility operations totalled $12.6 billion for the quarter and $54.2 billion for 2023.
Looking ahead, Shell said cash capital expenditure for 2024 is expected to be within $22 to $25 billion with Integrated Gas production expected to be approximately 930 to 990 thousand boe/
Upstream production is expected to be approximately 1,730 to 1,930 thousand boe/d and marketing sales volumes are expected to be approximately 2,150 to 2,650 thousand b/d.
The firm increased its dividend by 4% to $0.344.
BT ekes out modest growth in third quarter
BT Group PLC (LON:BT) on Thursday eked out modest growth in revenue and earnings in the third quarter but warned performance continued to be hit by rising costs and that its broadband base continued to decline.
The telco said in the third quarter ending December, adjusted revenue rose 3% to £5.34 billion from £5.21 billion the year prior while adjusted Ebitda edged 1% higher to £2.03 billion from £2.01 billion.
Delivering her first trading update as Chief Executive, Allison Kirkby, said: “BT Group has delivered another quarter of revenue and EBITDA growth, while rapidly building and upgrading customers to our full-fibre broadband and 5G networks, and we continue to be on track to achieve our financial outlook for the year.
But BT said financial performance continues to be impacted by higher input costs, legacy declines and prior year one-offs, partly offset by cost transformation and growth in Small & Medium Business and Security.
The firm said Openreach broadband average revenue per user grew by 10% year-on-year but reported broadband line losses of 369,000 in the year to date, a 2% decline in the broadband base.
It warned ongoing weak broadband market conditions mean losses will exceed 400,000 in 2024.
The firm said fibre to the premises (FTTP) build rate accelerated to 73,000 per week delivering a record of 950,000 premises passed in the quarter with the FTTP footprint now expanded to 13 million premises with a further 6 million where initial build is underway.
Openreach customer demand remained strong for FTTP with net adds of 432,000 in the third quarter with total premises connected now 4.4 million.
The company reconfirmed all 2024 financial outlook metrics.
FTSE 100 called lower as Fed says March rate cut unlikely
The FTSE 100 is expected to open lower after the chair of the US Federal Reserve poured cold water on hopes for a cut in interest rates in March as they left interest rates unchanged.
Spread betting companies are calling London’s lead index down by around 26 points after closing down 35.74 points at 7,630.57 on Wednesday.
The move comes ahead of the Bank of England’s own interest rate call at midday - it too is expected to leave interest rates unchanged.
US equity markets sold off heavily after the Federal Reserve Chair Jerome Powell dented hopes for a cut in interest rates in March, saying it is not the "most likely case."
On Wall Street, the Dow Jones Industrial Average closed down 0.8%, the S&P 500 tumbled 1.6% and the Nasdaq Composite declined 2.2%,
"I don’t think it's likely that the committee will reach a level of confidence by the time of the March meeting, to identify that March is the time to do that," he said in a press conference.
James Knightley at ING Economics said the Federal Reserve "doesn't seem to be in a hurry to cut interest rates."
"We still think May is the more likely start point for policy easing rather than March, even if the arguments for earlier moves are building."
"We suspect that the Fed recognises its credibility was damaged by its 'inflation is transitory' assertion in 2021 only to have to rapidly reverse course with significant rate hikes through 2022 and 2023."
"The last thing the Fed wants to do is get it wrong again at a key turning point, loosen too soon, too quickly and reignite inflation pressures," he added.
Back in London, BT, Glencore (LON:GLEN) and Shell lead the agenda, ahead of the BoE’s rate call.