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Thursday preview: BoE announcement due; Tesco, Whitbread updates eyed
(Sharecast News) - Thursday will bring the release of full-year results from FirstGroup and XPS Pensions, first-quarter trading updates from Tesco and Whitbread and the latest policy announcement from the Bank of England.
As far as Tesco is concerned, Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said it remains the largest supermarket in the UK, with further market share gains helping retail sales rise by 4.3% to £66.6bn last year.
"Despite slimmer profit growth as higher employment costs squeezed margins, free cash flows landed well ahead of market expectations, and the group's ploughing ahead with its current £0.8bn share buyback program," he said.
Chiekrie said the first-quarter update should see sales continue to trend higher. "The pace of growth will likely slow as the year progresses, driven by elevated oil prices putting pressure on consumers' budgets and forcing more downtrading into cheaper private-label goods.
"But Tesco's huge scale should help it to negotiate hard with suppliers and keep prices competitive, giving them little reason to look elsewhere. If operations can be streamlined as expected, there could still be some upside to the group's cautious full-year guidance, which points to underlying operating profits of £3.0-3.3bn."
All eyes will be on the BoE's rate decision at midday, particularly after figures released on Wednesday by the Office for National Statistics showed that inflation unexpectedly held steady in May as lower food prices helped offset sharply higher transport costs.
The consumer prices index rose by 2.8% in the 12 months to May, unchanged on April and versus consensus for a rise to 3.0%.
Expectations before the inflation data were for the BoE to stand pat on rates at 3.75%. Neil Wilson, UK investor strategist at Saxo Markets, said the inflation reading "takes a rate hike by the Bank of England completely off the table, and should help prevent the MPC swinging behind a hike in July".
Across the pond, first-quarter earnings from retailer Kroger are due.
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