Yahoo Finance What to Watch: Tesco profit jumps, long Brexit extension looms, and Asos profits crash
Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:
Tesco profit jumps
Tesco (TSCO.L) has reported a 28.8% rise in full-year pre-tax profits to £1.67bn, as the supermarket’s turnaround plan looks to be completed.
Revenue at the supermarket rose 11.2% to £63.9bn and UK like-for-like sales rose by 1.7% in the full year. The results beat analysts’ forecasts and shares in the supermarket group were up 1.2%.
CEO Dave Lewis said: “After four years we have met or are about to meet the vast majority of our turnaround goals. I’m very confident that we will complete the journey in 2019/20.”
Clive Black, an analyst at Shore Capital, said in a note: “Following this update we are minded to be setting out the expectation to be upgrading our FY2020 and FY2021 financial forecasts for Tesco.”
Long Brexit extension looms
European Union leaders are set to grant Britain a long extension to the Brexit timetable at an emergency summit later today.
UK prime minister Theresa May went on a whistle-stop tour of Germany and France on Tuesday to try and shore up support for a short delay to Brexit until 30 June.
However, EU leaders are understood to still favour a one-year “flexible” extension to Article 50 with the option to withdraw any time during that period if a Brexit deal is agreed. EU leaders will meet at 5pm tonight to make a formal decision on what to offer the UK.
There was little action for the pound ahead of tonight’s decision. Sterling was flat against the euro at €1.15 (GBPEUR=X) and flat against the dollar at $1.30 (GBPUSD=X).
Asos profit dives
Online fast fashion retailer Asos (ASC.L) blamed “temporary transition costs” on an 87% collapse in half-year profits to £4m.
Sales grew 12% at constant currency to £1.3bn in the six months to 28 February.
CEO Nick Beighton said: “We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.
“We are nearing the end of a major capex programme. Whilst this has inevitably involved significant disruption and transition costs, the global capability it now provides gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.”
Despite the downbeat update, Asos shares were up 3.8%. Connor Campbell, an analyst at SpreadEx, said: “It appears investors are relieved the online retailer hasn’t altered its full year forecasts from the price-eroding revisions posted last December, with expectations of a 15% rise in reported sales and a 2% increase in its EBIT margin.”
Stagecoach banned from rail bids
Stagecoach (SCG.L) has been banned from competing for three rail franchises by the government because of a row over pensions.
The train and bus operator said it was verbally informed by the Department for Transport that it has been disqualified from three UK rail franchise competitions – East Midlands, South Eastern and the West Coast.
Bidders for the franchises were asked to bear the full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said. It added that the Pensions Regulator is seeking additional funding because of “serious doubts” over the Government’s ongoing support for the industry-wide scheme.
Stagecoach said it was “shocked” and “extremely concerned” by the decision.
Strong start for Europe’s biggest IPO of 2019
Middle Eastern payments group Network International completed Europe’s biggest initial public offering of the year so far on Wednesday as it floated on the London Stock Exchange.
Network International, which did not raise any new funds in the listing, was valued at £2.2bn in the IPO. Shares were listed at 435p on their debut but rose by as much as 16% as trading began, according to Bloomberg.
UK GDP slows and ECB decision due
UK GDP growth slowed to 0.2% in February, official data released on Wednesday morning showed.
The month-on-month growth was down from 0.5% in January and in-line with expectations.
Better-than-expected industrial production and manufacturing numbers were also published by the Office for National Statistics (ONS). Year-on-year manufacturing growth rebounded from a slump of 0.7% in January to positive growth of 0.6% in February. Industrial production grew by 0.1% in February, against forecasts of a 0.9% slump.
The European Central Bank will also deliver its latest interest rate decision at 11.45am UK time. The central bank is expected to keep the headline interest rate steady at 0%. ECB chief Mario Draghi will give a press conference shortly after the decision is published.
Neil Wilson, chief market analyst at Markets.com, said: “Don’t expect any fireworks from this outing for the Governing Council. A month ago we got a triple whammy of dovish moves with new stimulus, amended forward guidance and growth and inflation forecasts revised lower.
“Having already pushed back on rate hike expectations at its last meeting, and announced plans for a fresh round of TLTROs, it seems unlikely that the ECB has any desire to change its tune this time. It should stick to the mantra that rates will be on hold until 2020.”
Debenhams job fears
At least 50 Debenhams stores are likely to close across the UK despite reassurances from the retailer on Tuesday, analysts warn.
Debenhams fell into administration on Tuesday, but the bulk of the business was immediately sold to a consortium of its lenders, which include banks and hedge funds. A more long-term buyer is now being sought as part of efforts for lenders to recoup over £250m that has been lent to Debenhams.
Debenhams said on Tuesday the deal “delivers continuity for all Group operations and was in the best interests of the Group’s creditors, employees, customers, pension holders, and suppliers.”
However, Clive Black, a respected retail analyst at stockbroker Shore Capital, and his colleague Greg Lawless warned in a note on Tuesday that “store closures [are] inevitable.”
European markets
European stock markets were quiet ahead of the big ECB decision later today and the publication of the latest Federal Open Market Committee (FOMC) meeting minutes in the US at 6pm this evening.
Britain’s FTSE 100 (^FTSE) was flat, Germany’s DAX (^GDAXI) was up by 0.3%, France’s CAC 40 (^FCHI) was up by 0.3%, and the Euronext 100 (^N100) was up by 0.3%.
Asian markets were mostly lower overnight. Japan’s Nikkei 225 (^N225) was down by 0.5%, Hong Kong’s Hang Seng index (^HSI) was down by 0.1%, and China’s benchmark Shanghai Composite (000001.SS) was flat.
What to expect in the US
US stock futures were pointing to a slightly higher open later today in the US. S&P 500 futures (ES=F) were up by 0.1%, Dow Jones Industrial Average futures (YM=F) were up by 0.1%, and Nasdaq futures (NQ=F) were up by 0.1%.
Companies reporting in the US later today include:
