Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

As always, the tone for January tends to be set by the retail sector when we get a round-up of the Christmas trading updates. Retailers’ profits generated in the six-week period leading up to Christmas and the New Year give us a crucial indication of the health of the retail nation. The first key updates to keep an eye out for are those from Marks & Spencer and the supermarket chains Tesco, Sainsbury’s and Ocado.

Here is a round-up of some of the stocks to keep an eye on as we head into 2024 as these companies issue their latest results or trading updates.

This is not a recommendation to buy or sell these investments and is purely insight into some of the companies that will be announcing results over the next few months.

Read on or jump straight to the companies below.

Marks & Spencer

Christmas is traditionally a good time of year for grocers, as consumers pull out all the stops to serve up festive must-haves. That should bode well for Marks & Spencer. Its food offering has been core to the impressive turnaround it’s currently mid-way through. M&S shares have been climbing over the past 12 months, not least when the group reported a boost in its latest first-half pre-tax profits, which jumped 56.2% to £326m. It also said it would pay a dividend to shareholders for the first time since before the pandemic.

M&S is back in fashion and not only with investors, but also - most crucially - with shoppers. Its food has gone from being largely a one-off luxury to a daily essential for many customers. And that’s no mean feat at all, slap bang in the middle of a cost-of-living crisis.

But it’s also its new fashion range that has breathed life back into the 139-year-old retail stalwart that frankly had seen better days when it was ignominiously booted out of the FTSE 100 index of leading shares back in 2019.

But that was then and now back in the FTSE 100 and with ad campaigns featuring Sienna Miller wearing its stylish, colour pop clothing and collabs with Gen Z influencers and the like popping up on Instagram and TikTok, M&S is reaching a brand-new audience. Arguably, good old Marks most definitely has its spark back.

That’s not to say the work is done though. Store closures have already left huge gaps on high streets up and down the country where M&S stores once proudly stood and there are still more to come. Chair Archie Norman, who is credited with the M&S transformation, says it’s all necessary though and insists he’s only 30% of the way through the work that needs to be done.

Notably, he remains bullish about the company’s joint venture with Ocado, which while yet to make a profit, Norman says will get there - even if he is looking ahead three years or so from now.

Date for the diary: Look out for, “not just any” Christmas trading update, but the Marks & Spencer Christmas trading update, on 11 January.

More on M&S

Ocado

Speaking of Ocado, having suffered its first fall in annual grocery sales last year, after years of flying high as lockdown saw online sales boom, the company has been upping the ante to keep its partner M&S sweet. Almost 600 M&S products have been added to Ocado’s website in the run-up to Christmas in a bid to ease tensions with the retailer; boosting what it stocks to close to 90% of M&S’s total food range.

But, as Ocado has always been keen to stress, it’s more than just a grocer. It also has a logistics division and robotics business alongside grocery and it is these two areas that have been earmarked as growth drivers in 2024 and beyond.

To this end, Ocado is ramping up the use of new robotic arms to pick and pack groceries for shoppers at far faster speeds. The company’s new warehouse in Luton, Bedfordshire, which opened in September, will double the number of robots with arms from 22 currently to 44.  First unveiled in 2022, these newer robotic arms can pick individual products directly from storage boxes, replacing the need for people. Its existing robots, which criss-cross metallic grids to retrieve the boxes, had to pass them on to Ocado’s more than 500 human packers to finish the grocery packing for delivery.  It’s estimated that about half the range in Luton, where it has 50,000 products, will be handled by robotic arms “in the near term”, with a longer-term target of about 80%.

Date for the diary: Ocado is due to release its Christmas trading update on 16 January.

More on Ocado

Tesco & Sainsbury’s

While annual grocery inflation is falling - it was 9.1% in the four weeks to 26 November, down from 9.7% the month before, according to market data group Kantar - food price inflation has so far proven highly profitable for the major supermarkets.

Encouragingly for retailers, it said grocery sales had risen 6.3% year-on-year over the same period, with 28.4% of sales made on promotion, the highest in over two years. Kantar has forecast that, as a result of higher prices and shopper spending, this December could see grocery sales hit over £13 billion for the first time. And that could make Christmas 2023 an even a bigger winner than usual for the big supermarkets.

Key, of course, will be what they themselves have to say about how their Christmases went. But it all bodes well for some big wins. Consumer research group Nielsen also reckons Christmas 2023 could see a record spend on groceries. Its data, for the four and half weeks to 2 December, suggests the likely winners from the festive spend will be the German discount chains, Marks & Spencer/Ocado Retail, Sainsbury's and Tesco.

There was never any doubt that old foes, the German discounters Aldi and Lidl would continue to disrupt business. In fact, they’re almost guaranteed to remain very much front of mind for cash-strapped consumers. Aldi, which is offering Christmas dinner for six at £2.25 a head, has already said it sees a record-breaking Christmas on the cards. But you can be sure their UK counterparts won’t go down without a festive fight.

Lidl, Aldi, Ocado, Sainsbury’s and Tesco were the best performers over the 12 weeks to 26 November, according to Kantar. Interestingly though, it said Sainsbury's, currently the number two player among the UK big five (Tesco, Sainsbury’s Waitrose, Asda and Morrisons) delivered its largest market share gain in over a decade.

Dates for the diary: First up with its Christmas trading update will be Sainsbury’s on 10 January. Tesco will report its Q3 and Christmas numbers a day later, on 11 January.

More on Tesco

More on Sainsbury’s 

Hotel Chocolat 

Hotel Chocolat will also be one to watch. Recently snapped-up by Mars, the niche, high-end chocolatier has worked and fought hard to keep its position as something of a non-essential (depending on the strength of your views on chocolate) must-have, but what does its takeover mean will become of the brand in 2024?

Mars is one of the world’s biggest food companies and the US’s fourth-largest private firm, with brands ranging from Snickers confectionery to Pedigree dog food and Dolmio pasta sauces.

Hotel Chocolat listed on the stock market in 2016 and has since doubled its revenues to £205m in the financial year to 2 July. Those results, though, it said were “disappointing” due to the impact of a “year of intensive reshaping to deal with the consequences of Hotel Chocolat’s previous fast growth”.

Mars has said it will use its international might to expand Hotel Chocolat’s brand in the UK and abroad, but says Hotel Chocolat’s manufacturing will remain in the UK.

Date for the diary: Hotel Chocolat’s half-year results should be out the first week of March.

More on Hotel Chocolat 

Associated British Foods

Another company to have so far successfully weathered the cost-of-living crisis is Associated British Foods, thanks in no small part to its low-cost Primark fast-fashion brand. It has remained a firm favourite with cost-conscious consumers, despite inflation hiking prices. In fact, it’s proving to be a combination that’s very good for business. AB Foods said that the 15% increase in sales to £19.8bn in the year to 16 September was “largely due to price increases across our businesses to mitigate high levels of inflation”.

Issuing its full-year results back in November, it did warn though that high costs would persist, particularly for food. The UK-based group, which also owns a grocery and ingredients division making products such as Kingsmill bread and Twinings tea, saw adjusted operating profits, excluding exceptional charges, rise 4% to £1.5bn while its margin declined “as expected” from 8.4% to 7.7% due to inflationary pressures.

Date for the diary: Associated British Foods is scheduled to give its next trading update on 23 January.

More on Associated British Foods

Greggs

Greggs, the bakery chain, has similarly proved resilient among cash-strapped customers. The success of its bakery range, from vegan sausage rolls to low-cost sweet treats and now late-night food offerings at some locations, has all been continuing to sell like the proverbial hot cakes. Third quarter sales rose 20.8% and full-year guidance suggests pre-tax profits will see growth of 11% to £164.7m.  

Again inflationary pressures are a risk. After all, there are only surely so many price hikes its customers can stomach. But so far, so good, at least in terms of sales. A net 82 shops were opened in the year to September and it plans to operate 3,000 stores by the end of 2026, up a quarter from today. A third-quarter trading update showed a 14.2% increase in like-for-like sales in the outlets Greggs manages in the 13 weeks to 30 September.  

Its new delivery partner Uber Eats is good news, but the emphasis will still be on price in 2024. The one big question is whether investors will be satisfied. Greggs’ share price hasn’t exactly piled on the pounds over the past year. The shares are currently about 5% up year-on-year, but 20% down on where they were two years ago.  

Date for the diary: Look out for a Q4 trading update from Greggs on 10 January. 

More on Greggs

Pets at Home

Pets at Home could well be another cost-of-living crisis victor. Much as it was a pandemic winner. Having seen the pandemic puppy (and other pet) boom, the “nose to tail” pet store and veterinary services chain has seen business continue to do well.

Despite the biting cost-of-living crisis, pet lovers are continuing to pamper their pets, much to the delight of shops-to-vets group Pets at Home, which is now on track to beat its previous profits forecast. It now expects full year pre-tax profits to come in around the £136m mark.

Put it down to puppy pester power, if you like, but if this Christmas is anything like the last one, it should have more good news for investors in the new year. And that’s in addition to the 4.5p a share dividend that is being paid out on 12 January.

The dividend payout was declared after first-half revenue came in at £774.2m, reflecting like-for-like sales growth of 6.2%. Underlying profits before tax fell 19.3% to £47.8m though, on the back of higher logistics costs.

The retail side of the Pets business grew 5.2%, despite some disruptions over the period due to the launch of its new distribution centre and digital platform. The smaller veterinary side of the business though saw record sales.

With sign-ups to Pets at Home’s Puppy and Kitten Club averaging over 23,000 a week during the pandemic, total numbers are now around the 8 million mark. That’s a lot of data it has at its fingertips, giving it plenty of opportunity for cross-selling its products and services.

It’s not all plain-sailing though. Pets still has plenty of scope to develop its online business, which is underway, but so far proving slow to gain momentum. But there are inflationary cost pressures ahead still and there is that Competition and Markets Authority investigation hanging over the entire business.

The CMA has launched an investigation into the £2 billion veterinary services market to discover whether vet surgeries are offering customers adequate services at fair prices.  It has come about after it spotted that the share of independent vet practices had fallen to just 45% of the industry by 2021, down from 89% in 2013.

The review will look at how prescription medication for pets is prescribed and sold, and how surgeries are involved in that sale of medications. Specifically, the regulator is investigating whether customers are aware that vet surgeries often operate within a network of larger companies that sell veterinary products. It will survey pet owners and practitioners in the field to discover their expectations for pricing and actual costs.

You can bet that as part of this process, Pets at Home, which owns Companion Vets Care and Vets4Pets, giving it a network of more than 450 vet practices in the UK, alongside its pet stores will be closely reviewed.

Date for the diary: Pets at Home is due to give its Q3 trading update on 30 January.

More on Pets at Home

Rightmove

Remember that old favourite - house prices? Long before the cost of living or Covid or even Brexit had even been heard of, the most popular dinner party topic was the state of the property market. Expect that to make a come-back in 2024.

Namely, the hot topic of whether or not interest rates will come down, what that will do for mortgage rates and the property market itself. The latest data seems unclear about the exact direction of travel.

There are some small signs that interest rates could be cut next year after recent data has shown that pay growth has slowed sharply.  Inflation has also come down - from 11.1% last autumn to 4.6% today, so it is starting to look like 2024 could be better on the interest rate front. Although it could take a little while for confidence to find its way through to the currently stagnant property market.

According to property website Rightmove, average asking prices for newly listed houses and apartments in the UK fell by 1.9% in December. That’s more than the historic average 1.5% decline typically seen in the final month of the year.

But that weakness looks to be slightly at odds with data from mortgage lenders Halifax and Nationwide a few weeks earlier. This seemed to show modest monthly price rises. And came with the tantalising suggestion that the past year's fall in house prices had bottomed out.

Not so, according to Rightmove. It believes asking prices are likely to drop another 1% in 2024, with affordability still stretched despite signs that mortgage rates are now past their peak. The property website said the number of sales agreed so far this year was 13% lower than over the same period last year, but did add that this was less of a drop than it had expected, given the very high number of house purchases in early 2022.

Date for the diary: Rightmove should issue its full year results at the start of March.

More on Rightmove

Burberry

Has the cost-of-living crisis finally filtered through to the wealthier consumer? And is this a blip or a worrying longer-term trend? Burberry has become the latest luxury brand to warn of a global slide in demand recently. It warned that its annual adjusted operating profit was likely to be at the “lower end” of the £552m to £668m consensus range.

Signs had already been emerging that affluent shoppers were becoming less willing to spend on luxury goods when industry leader LVMH reported sales growth of 9% for the most recent quarter. That was less than consensus expectations and a steep slowdown from the 17% increase it had recorded the previous quarter.

Burberry said revenues grew 4% to £1.4bn in the six months to September, but operating profits slid 15%. The US was hit the hardest with sales down 9% during the six months under review. Asia-Pacific was up 18% driven by China and Japan, while sales in Europe rose 14%, thanks to a higher number of tourists buying goods.

There is no doubt that Burberry will be looking very closely for any sign that the Asian luxury goods buyers, on which it so depends, are among those reining in their spending. Chinese buyers still typically generate around 40% of Burberry’s revenue.

The luxury goods sector has undoubtedly had a good run, despite the pandemic and the economic slowdown.  Figures show it has grown by an average of more than 20% a year since 2020. That is according to consultancy Bain, which says the industry’s historical average has typically been closer to 6%. Looking ahead, it says on an optimistic view the sector could see growth of 8%-10% this year, while a more pessimistic take on the current situation would suggest 5% is more likely. Crucially, it is younger luxury goods buyers who are most likely to feel the chill winds of an economic slowdown and trim spending where necessary. So, one to watch.

Date for the diary: Burberry is scheduled to issue its Q3 trading update on 19 January.

More on Burberry

Royal Mail-owner International Distributions Services

From reports of mail piling up and going undelivered leaving intended recipients to miss hospital appointments, receive cards and gifts weeks after the big day, Royal Mail has been under the spotlight in the run-up to Christmas for all the wrong reasons.

Royal Mail, or rather International Distributions Services (IDS), as it’s now trading under, as of October, has had a bad year. Or a few bad years, having been hampered by strikes, a slump in letter writing, weaker parcel volumes and huge losses.

Long-term pressures on revenue growth in parcels in a highly-competitive, price-sensitive market and both management and staff have failed to keep up. Royal Mail was only recently fined £5.6 million by regulator Ofcom for missing delivery targets for the year to March. The regulator found that Royal Mail delivered just 73.7%, so less than three-quarters, of First Class mail on time.  That’s something that households across the UK can no doubt attest to, as many have resorted to picking up their own mail as it’s sat undelivered for weeks at depots around the country.

Its prioritisation of parcels over letters has been blamed, as has staff absence and vacancies. But the fact is that the postal delivery service has not grown revenue by more than 1% a year since it was privatised in 2013.

In has come Martin Seidenberg, who took the helm in August, having led GLS, the Dutch subsidiary of IDS to profitability last year. That’s something that IDS/Royal Mail has yet to achieve.

Royal Mail plans to undergo a restructuring, but according to analysts the effects of this are not expected to be visible until the second half of the fiscal year.

There is some optimism around though, with a number of analysts feeling more positive about IDS’s longer-term prospects. And that has boosted the share price of late. However, in the meantime, revenues are still falling and operating losses of £295m for FY2024, including £50m of voluntary redundancy costs, have been pencilled in.

Time will tell whether this 507-year-old institution has what it takes to deliver in 2024 and beyond.

Date for the diary: The next Q3 trading update from International Distributions Services is out for delivery on 8 February. 

More on International Distributions Services

Five-year share price performance table

(%) As at 14 Dec 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Marks & Spencer  -6.3 -39.7 69.8 -46.7 117.6
Ocado 52.0 83.5 -26.2 -58.9 4.3
Tesco  34.0 -5.9 57.9 -16.7 32.7
Sainsbury’s -14.1 6.5 26.7 -14.5 40.8
Hotel Chocolat 52.9 7.1 12.7 -72.5 165.7
Greggs 71.3 -23.1 86.6 -17.9 7.6
Associated British Foods 21.4 -12.1 -14.3 -14.2 50.6
Pets At Home  145.9 41.7 21.4 -37.5 14.6
Rightmove  47.5 1.8 15.5 -23.8 4.3
Burberry  24 -13.0 -2.2 25.5 -24.3
Royal Mail-owner Industrial Distributions Services -10.6 41.8 50.7 -55.4 33.5

Past performance is not a reliable indicator of future returns
Source:
FE, as at 15.12.23 Basis: Total returns in GBP. Excludes initial charge.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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