Christmas sales disappointed, but Burberry says it can still meet targets for the full year as its move upmarket led by chief executive Marco Gobbetti helped underpin profitability.
The fashion label reported a 9 per cent fall in like-for-like sales for its third quarter ending December, which was even weaker than a recently lowered consensus forecast for a 7 per cent decline. A focus on full-price sales and lower levels of markdown meant gross margins improved, but this was offset by lower tourist traffic and Covid-19-related store restrictions.
New collections had “resonated well with new, younger clientele as well as existing customers”, and “localised plans and digital capabilities helped drive growth in rebounding markets”, Mr Gobbetti said.
“We believe that the [sales] miss is mostly a function of a likely weaker than anticipated exit rate in both Europe (mostly due to lockdowns) and the US,” said Morgan Stanley analyst Edouard Aubin. “The market should take some comfort from the fact that full price sales were up high single-digits year on year — indicating that the brand elevation journey is on track.”
Pearson said its full-year results will meet expectations in spite of the additional impact of Covid disruption in the fourth quarter. The textbook publisher said underlying sales growth fell 10 per cent last year due to “school closures, exam cancellations, reduced global mobility and international economic pressure on spending”, with its assessment and international divisions particularly affected, but that demand for online coursework had been strong.
British Airways owner IAG said it has agreed to buy Air Europa of Spain for a cut-price €500m in an amended deal. IAG had agreed to pay €1bn for Air Europa in November 2019.
Dixons Carphone posted core like-for-like revenue growth of 11 per cent for its peak trading period through Christmas. The retailer said group online electricals sales were up 118 per cent in the 10 weeks ended January 9 and that its UK electricals credit book grew to 1.4m customers. Management left guidance for the full year and medium term unchanged.
Aggreko, the generator hire specialist, said in a brief statement that its 2020 profit before tax will be “slightly ahead” of the top end of a previous guidance range of £80m to £100m.
Regus office owner IWG said it will book a £160m provision with full-year results to cover “network rationalisation” in response to the pandemic. The new charge will be in addition to net charges of £155.8m related to Covid that it flagged with interim results in August. Group revenue for the year is anticipated to be approximately £2.45bn, with a “modest operating cash outflow” in December on contract renegotiations with landlords, IWG said.
JD Wetherspoon said it has raised £93.7m before costs with an overnight share placing, its second cash call of the Covid crisis. The pub operator sold shares equivalent to 6.95 per cent of its share capital at £11.20 apiece, a 5.3 per cent discount to Tuesday’s closing price.
WHSmith said it expects to burn £15m to £20m a month during the current UK lockdown, and that Christmas trading had beaten its expectations. The newsagent said it had ended the year with £340m of cash and available credit, ahead of its plan.
CMC Markets said in a third-quarter update to the end of December that net operating income for the full year 2021 will be at the upper end of the current market consensus.
Beyond the Square Mile
Jack Ma has resurfaced in a short online video posted online on Wednesday praising China’s teachers, marking the first time the billionaire has been seen in public since the dramatic suspension of Ant Group’s planned $37bn initial public offering in October. “My colleagues and I have been studying and thinking, and we have become more determined to devote ourselves to education and public welfare,” said Mr Ma, according to local media.
David Solomon, Goldman Sachs chief executive, says the boom in listings of blank-cheque companies on Wall Street is unsustainable, casting doubt on a financing tool used to raise nearly $79bn from investors last year. Speaking to analysts as Goldman announced a doubling of its fourth-quarter profits, Mr Solomon on Tuesday said he did not expect special purpose acquisition companies, or Spacs, to continue to list at their current pace and raised questions about whether issuance had “gone too far”.
Netflix will no longer raise debt to fund its spending spree on television shows and films and may begin returning money to shareholders through buybacks, marking a milestone in the company’s evolution as it reported passing the milestone of 200m subscribers. Over the past decade, Netflix borrowed more than $16bn in debt as it raced to build a war chest of content, with original programming like the House of Cards and the Christmas hit series Bridgerton.
Essential comment before you go
For a government seeking to pay for a coronavirus support package costing more than £300bn, corporation tax looks like the place to start. Rishi Sunak’s longest-serving recent predecessor, George Osborne, fetishised low corporation tax, egged on by the CBI. As a result, the levy now sits at an inexpensive 19 per cent.
A 14 per cent profit downgrade — by broker Peel Hunt — is somewhat at odds with investors’ belief that AO will exit the pandemic delivering improved profitability on rapidly slowing sales growth.
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