Trend ticker: JD Wetherspoon | kingfisher

Wetherspoon shares are up 7%. Photo: Hannah McKay/Reuters

JD Weather Spoon (JDW.L)

Pub chain JD Wetherspoon has seen its sales surpass pre-pandemic levels as chairman Tim Martin said he was looking forward to “wild” inflationary pressures easing across the pub industry.

Wetherspoon reported a 5% increase in sales for the six months ended January 29 compared to the same period in 2019 and a 13% increase year-on-year.

Revenue rose to £916m ($1.1bn) during the period compared to £807.4m a year earlier.

The company reported a pre-tax profit of £4.6m compared to a loss of £26.1m last year. However, that’s still a 90% drop from the £50m profit it made in 2019 before the pandemic.

“Wetherspoons has endured many ups and downs during its existence and always seems able to survive unscathed. Founder Tim Martin is certainly not afraid to complain, but the company knows what the customer wants and can always deliver,” said Russ Mold, investment director at AJ Bell.

Continue reading: FTSE falls as Bank of England warns interest rates will rise again as firms hike prices

Wealth Club’s Charlie Huggins said: “Wetherspoon’s commitment to low prices keeps customers loyal, as evidenced by robust like-for-like sales growth. These value traits are key and should mean the group is better positioned than many of its peers to weather a downturn in consumer spending.

“However, profitability remains well below pre-pandemic levels. Wetherspoon’s business model is highly exposed to rising labor, energy and food costs. Unfortunately, it doesn’t have the pricing power to fully offset these cost pressures. In the current inflationary environment, that means one thing above all: pressure on margins.”

Kingfisher (KGF.L)

The company behind Screwfix and B&Q showed a sharp decline in earnings from record levels set in the wake of the COVID-19 pandemic.

In the 12 months to the end of January, adjusted profit before tax reached £758m, down more than 20%. It is expected to drop to around £633m this year.

Sales fell 0.9% to £13 billion. On a like-for-like basis, revenue was 2.1% lower but 15.6% above pre-pandemic levels.

Shares in FTSE 100 (^FTSE)-listed Kingfisher plummeted after it announced a 20% fall in adjusted pre-tax profit and is heading for a 5% weekly decline.

Kingfisher, which maintained its total dividend at 12.40 pence per share, also announced new medium-term financial priorities focused on growth, cash generation and higher returns for shareholders.

Tour operator Tui wants to raise 1.8 billion euros by offering shares at a 40% discount so it can repay the huge debt it built up during the pandemic when it had to be bailed out by the German government.

The company will offer 328.9 million new shares at a price of €5.55 per share, a significant discount from the market price.

At the end of 2022, Tui’s net debt was 5.3 billion euros.

“A large discounted fundraiser at TUI hurts the share price in the short term, but over the long term it could be the path to a more meaningful recovery for the tour operator,” said AJ Bell’s Mold.

“Due to the debt accumulated during the pandemic, TUI has been limited in its ability to invest in growth while the travel sector recovers. A brief update on trading indicated continued momentum in bookings, but far too much of the company’s cash is currently disappearing into interest payments.

“The question is whether the money raised will be enough. Shareholders may eventually absorb the dilution, but if TUI is forced to come back with its begging bowl soon, it can make short work of it.”

Market mover next week

Looking ahead for the week ahead, investors should keep an eye out for Next (NXT.L). the annual results will be published on Wednesday 29 March.

“These full year results will be compared to the forecasts in this trading update, while analysts and shareholders will also be on the lookout for any guidance from Lord Wolfson for the year to January 2024 and compare that to the current consensus forecasts,” said AJ Bell’s Mold and Danni Hewson , head of financial analysis at AJ Bell, said.

Bellway (BWY.L) is set to release its first half results on Tuesday, March 28, expecting few surprises after the company issued a detailed trading update in February.

“Bellway stock is trying to forge a rally off the fall lows, but it’s not doing a very convincing job at it, and it’s still languishing at less than half its pre-pandemic high from early 2020. And that seems to be the case In fact, at many consumer-facing companies, stocks are losing momentum and starting to tip over again,” said Mold and Hewson.

Continue reading: Bank of England hikes rates to 4.25% for 11th time

Also on Tuesday, Micron Technology (MU) reports second quarter results as investors are keen to track companies in the silicon chip sector.

“Disappointing earnings, cuts in capital spending budgets, skyrocketing inventories and recession fears have all weighed heavily,” Mold and Hewson said.

“An uptick in trading and the SOX would potentially bode well for both the global economy and global equities as the benchmark has had an uncanny record as a decent guide to investors’ risk appetite – it peaked six to nine months earlier than the S&P 500 and FTSE All-World did so in 2000 and 2007 to herald two stormy bear markets, then bottomed out in 2002 and 2009 ahead of those headline indices to signal the start of a new bull market.”

To Watch: Stocks to watch in Europe: Pubs, Travel, Banks

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