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Wednesday preview: Sainsbury's, SuperDry, TW, Tullow and industrial production

By Oliver Haill

Date: Tuesday 09 Jan 2018

LONDON (ShareCast) - (ShareCast News) - Wednesday sees UK industrial production, construction output and trade data, plus company updates from retailers Sainsbury's and SuperGroup/SuperDry, builder Taylor Wimpey and Tullow Oil.
Sainsbury's will report on its third quarter performance, covering the supermarket group's 15 weeks of trading to 6 January.

A day earlier, industry data from Kantar Worldpanel showed Sainsbury's grew sales 2.0% in the 12 weeks to 31 December, with sales up across its convenience stores, larger supermarkets and online deliveries.

Deutsche Bank forecast 0.4% growth in retail like-for-like sales excluding fuel, compared to 0.6% growth in the second quarter, with a 0.7% contribution from new space leading to +1.1% total sales growth excluding fuel.

UBS, noting Sainsbury's "seemingly erratic sales momentum", forecast LFLs up 1.4% for the quarter, with Sainsbury +0.1% and Argos +4.0%.

Clothing retailer SuperGroup, which recently confirmed it was changing its corporate name to SuperDry in line with its main retail brand, will report first-half results and an update on sales in the 10-week peak trading sales period.

The company guided to underlying profit before tax of 25-26m at its trading update in November.

"Focus will be on peak trading for which SuperGroup will report revenues for wholesale, stores and e-commerce," said Deutsche, forecasting store 9.6% growth in revenues to 125.6m and online up 30% to 61.7m.

"This is the first time the company will be reporting wholesale revenues and we forecast 66.1m for the period. We expect 32,500 sq ft of new net owned store space, primarily in the EU."

Taylor Wimpey is expected to put out a trading statement, following an update in mid-November that confirmed that the group was on target to meet full-year expectations.

Sales rates in the year to that point had averaged 0.81 up from 0.75 the previous year, although due to the reduction in higher value London reservation the order book declined slightly from 2.3bn to 2.2bn.

Numis analysts expected the forthcoming trading update to be "focused on the strength of demand in the final 1.5 months of the year, how this has fed through to the order book and what the prognosis for average outlets is in 2018 (given that this should be the key driver of volume growth and therefore profits)."

They are also going to be looking for an update on "how far progressed TW is in with regard to settling its legacy leasehold issues and whether the 130m provision remains adequate".

Tullow Oil is also set to publish a trading update, with full year group production outturn last guided to be in the range of 90.5-95k barrels of oil per day including insurance payments.

November's trading update also saw the company guide to free cashflow of around $0.4bn.

UBS analysts said: "We expect the company to provide a more concrete drilling plans ramping up TEN production in early 2018 and we forecast TEN production to be 67kboe/d gross in 2018.

"For 2018e, we forecast group production at 84kboe/d. Given the messaging around capital discipline, we do not expect an ambitious exploration & appraisal activity in 2018."


Economists at RBC Capital Markets noted that the IP and construction data will be important inputs into the Q4 GDP calculations, the first estimate of which is due later this month.

RBC was most surprising that manufacturing output rose only 0.1% month-on-month in October despite the recent buoyancy of activity suggested by the manufacturing PMIs, though this was its sixth successive month of expansion in October and came after a September surge of 0.7%.

Soft data for November suggests activity has improved, with the manufacturing purchasing managers' index indicating output growth had accelerated to its second-highest in three-and-a-half years amid greater overseas demand as global growth improves.

The consensus forecast is for 0.4% month-on-month growth in industrial production, led by a similar rise in output in the energy supply sector.

Manufacturing output, is likely to have risen only modestly, said Pantheon Macroeconomics, looking for a 0.3% month-to-month rise.

"Surveys highlight strong momentum, but SMMT data point to a 2.0% fall in car production. In addition, oil producers' estimates of production volumes point to a 2.0% fall in mining and quarrying output."

After construction output dropped 1.6% in September and another 1.7% in October, more recent surveys suggested output held steady over the quarter, indicating output recovered in November.

The consensus is for a 0.7% rise, but RBC feels a strong rebound is "unlikely" meaning the sector is likely to drag on growth this quarter.

As for trade, the deficit was 1.4bn in October, well below its average of 2.3bn in the previous 12 months.

"October's small deficit, however, partly reflected an improvement in the erratics trade, which likely will reverse in November," said Pantheon, expecting the overall deficit to widen to about 2.0bn in November, above the consensus 1.5bn.

Wednesday January 10

Crude Oil Inventories (US) (15:30)
Wholesales Inventories (US) (15:00)

Balance of Trade (09:30)

Shoe Zone


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