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(Alliance News) - Supermarket chain J Sainsbury said Thursday the latest Covid-19 lockdown in England could boost annual profit by 5%, but it still announced 3,500 job cuts as part of a cost-reduction plan.
Supermarket chain J Sainsbury sunk to a GBP137 million interim pretax loss, from a GBP9 million profit a year earlier. The company was hit by a bruising GBP438 million in one-off costs in the six-month period, which ended September 19.
Group sales, excluding VAT but including fuel, inched 1.1% lower to GBP14.93 billion from GGBP15.10 billion. Like-for-like sales excluding fuel jumped 6.9% annually, however.
"Sales during the first half were stronger than the base case assumptions we outlined in April, particularly at Argos, driving a strong underlying profit increase against a soft comparative base," the company said.
Commenting on the lockdown that has gone into effect on Thursday in England, which doesn't close grocery stores and limits competition from restaurants, Sainsbury's said: "We cannot fully predict the impact of COVID-19 and lockdown restrictions on retail sales and costs for the remainder of the second half of the year, but our current assumptions would result in full year group underlying profit before tax increasing by at least 5% year on year."
Looking further ahead, the company said it will close around 420 Argos standalone stores, reducing the standalone estate to just 100 by March 2024. However, it will open 150 more Argos stores in Sainsbury's supermarkets by that target date, as well as 150 to 200 more Argos collection points in supermarkets and convenience stores.
Sainsbury confirmed that as part of its cost-cutting plans, "around 3,500" jobs could be lost. This is higher than the 3,000 job cuts reported by UK media outlets ahead of Thursday's results announcement. "We will do everything possible to find alternative roles for our colleagues," Sainsbury's said.
The stock was down 2.0% in early trade Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 5,905.17
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Hang Seng: up 3.3% at 25,695.92
Nikkei 225: closed up 1.7% at 24,105.28
DJIA: closed up 367.63 points, or 1.3%, at 27,847.66
S&P 500: closed up 74.28 points, or 2.2%, at 3,443.44
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GBP: up at USD1.3020 (USD1.2977)
EUR: up at USD1.1745 (USD1.1710)
Gold: up at USD1,910.45 per ounce (USD1,901.50)
Oil (Brent): flat at USD40.64 a barrel (USD40.62)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
0900 GMT UK SMMT vehicle registration figures
0930 GMT UK CIPS-Markit construction purchasing managers' index
1100 GMT Ireland industrial production and turnover
1200 GMT UK BoE interest rate decision and monetary policy report
1100 CET EU retail trade
1100 CET EU autumn economic forecast
0730 EST US Challenger job-cut report
0830 EST US preliminary productivity & costs
0830 EST US initial jobless claims
1030 EST US EIA weekly natural gas storage report
1200 EST US monthly retail chain store sales index
1400 EST US Fed interest rate decision
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The Bank of England kept interest rates on hold, as expected, but boosted quantitative easing by a bit more than anticipated, as the UK's already fragile economy is set for a further hit from new lockdown measures. The Bank of England's Monetary Policy Committee voted unanimously to keep the Bank Rate at 0.1%. But the Andrew Bailey led central bank unleashed an extra GBP150 billion of economic support, taking its total stock of UK government bond buying to GBP875 billion. The market had widely expected just GBP100 billion of QE to be added. "All restrictions announced up to and including October 31 have been reflected in the committee's judgements," BoE said. "There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak." The BoE now expects to see a decline in the UK's gross domestic product during the fourth quarter but tips household spending and GDP to increase early in 2021 as Covid-19 restrictions ease.
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People in England will wake up to familiar coronavirus restrictions on Thursday as the country heads into a second national lockdown. Pubs, restaurants and non-essential shops have once again been forced to close their doors and members of the public are ordered to stay at home for the next four weeks in a bid to reverse the spread of Covid-19. It comes amid reports that UK Chancellor Rishi Sunak is set to confirm in a statement to the Commons on Thursday morning that the 80% furlough scheme will continue for businesses that have been shut due to restrictions beyond this lockdown period. Meanwhile, the UK prime minister has been warned by a group of northern Conservative members of Parliament that they do not want their constituencies "locked into lockdown" indefinitely. On Wednesday evening, MPs voted by 516 to 38 – a government majority of 478 – for the new restrictions, which are due to expire on December 2. However, in a bigger-than-expected Commons rebellion, 32 Tory MPs defied the whips to vote against the measures, with two more acting as tellers for the noes.
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The knife-edge US presidential race tilted toward Democrat Joe Biden early Thursday, with wins in Michigan and Wisconsin bringing him close to a majority, but President Donald Trump claimed he was being cheated and went to court to try and stop vote counting. Tallying of votes continued through a second night in the remaining battleground states where huge turnout and a mountain of mail-in ballots sent by voters trying to avoid exposure to the coronavirus made the job all the harder. Both candidates still had paths to hit the magic number of 270 electoral votes representing a majority of states, thereby winning the White House. But momentum moved to Biden, who made a televised speech from his hometown of Wilmington, Delaware, to say that "when the count is finished, we believe we will be the winners." By flipping the northern battlegrounds of Michigan and Wisconsin, and also winning formerly pro-Trump Arizona, Biden reached 264 electoral votes against 214 so far for Trump. To reach 270 he was hoping next to add the six electoral votes from Nevada, where he had a tiny lead, or, even better, the larger prizes of hard-fought Georgia or Pennsylvania.
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The US Federal Reserve's meeting this week concludes against an uncertain election backdrop, which analysts think could pose a risk to Congress stumping up some further fiscal support. The Federal Open Market Committee will conclude its two-day policy meeting on Thursday and announce its decision at 1900 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 GMT. While Biden is now the favourite to win the presidency, there was no 'blue wave' and the outcome tosses a much-needed US stimulus package into uncertainty, commented ING. "This is not a good outcome for the economy since the headwinds from rising Covid cases, troubled state and local government finances (that risk further spending cuts and job losses) and falling incomes as unemployment benefits expire, are growing in strength."
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BROKER RATING CHANGES
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SHORE CAPITAL RAISES GLAXOSMITHKLINE TO 'HOLD' ('SELL')
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PEEL HUNT RAISES SEGRO TO 'HOLD' ('REDUCE')
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LIBERUM RAISES GEM DIAMONDS TO 'BUY' ('HOLD') - TARGET 60 (30) PENCE
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COMPANIES - FTSE 100
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AstraZeneca left annual guidance unchanged after posting a 3% third-quarter revenue hike. Revenue in the quarter amounted to USD6.58 billion, taking revenue for the nine-month period to USD19.21 billion, 8% higher annually on a reported basis, or 10% at constant currency. "We made encouraging headway in the quarter, despite the ongoing disruption from the COVID-19 pandemic. Highlights of the sales performance included further success in Oncology and an acceleration in the progress of Farxiga," Chief Executive Officer Pascal Soriot said. Looking ahead, annual revenue is still expected to grow by a "high single-digit to a low double-digit percentage" at constant currency.
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Auto Trader said the announcement of the new lockdown in England caused it to decide to pay no interim dividend, despite reporting that demand for cars has been strong since early June, up 20% on a year before. The vehicle sales platform said it expects car retailers to be able to sustain some sales in November via home delivery and click & collect offerings.
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COMPANIES - FTSE 250
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Casino operator Rank Group confirmed it is in discussions with advisers for an equity issue of up to 19.9% of its existing share capital. It said the new equity would be used to strengthen its balance sheet but that there is no certainty the offering will proceed.
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Homewares retailer Dunelm said it has continue to perform strongly both in its stores and online since its first quarter trading update in October. However, it noted that homewares are excluded from the listed of permitted retail businesses during the new lockdown in England. "This is both unexpected and inconsistent with the guidance provided during the previous national lockdown, when homewares was added to the essential retail list in May," Dunelm complained. As a result, its 145 stores in England will be closed from Thursday, offering only click & collect services. It noted its 9 stores in Wales will reopen on November 9, and its stores in Scotland and Northern Ireland remain open.
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Thursday's Shareholder Meetings
Arc Minerals Ltd - AGM
Panthera Resources PLC - AGM
PCI-PAL PLC - AGM
Scancell Holdings PLC - adjourned GM re Redmile Funds convertible loan financing
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
