Ryanair upgrades, Superdry and Joules miss
Ryanair has defied fears about the airline market suffering from
weaker demand and too much supply. Management today has reported a stronger
than expected Christmas and New Year. Forward bookings Jan to Apr are running
1% ahead of this time last year, and Ryanair believes this will result in
slightly better than expected ave. fares in Q4, while full year Group traffic
will grow to 154m (previously guided at 153m). On the negative side,
Laudamotion is underperforming, with average fares lower than expected despite
the solid traffic growth and load factors. Price competition with Lufthansa is
to blame. Forecast net loss widen from under €80m to approx. €90m.
As a result management has raised
Full Year profit guidance from €800m – €900m, to a new range of €950m –
This is a big improvement from the Nov update, when we
noted: “First half revenue grew 11% to
€5.39bn, with profits flat at €1.15bn. But fares were down 5%, due to the
weak consumer demand in the UK and overcapacity in Germany and Austria. Ryanair
is facing headwinds from lower fares, higher fuel bills and rising staff costs.
The fuel bill rose 22% (+€289m) to €1.59bn, on +11% traffic growth. Ex-fuel
unit costs rose 2%, largely because of higher staff costs, increased pilot pay
and higher than expected crew ratios. Faced with these headwinds Ryanair will
need to cut costs.”
Ryanair remains very well placed
to take advantage of consolidation in short haul European air travel. But its
low cost model is facing headwinds.
JD Sports continues to perform. In a short trading
update that offered little in the way of detail, management stuck to full year group headline profit before tax being in the
‘upper quartile’ of current market expectations, which range from £403 million
to £433 million. From the tone of the statement it seems it was tough in the UK
in the Christmas period but they think overseas sales are better and will
follow through into January numbers. So I think we need to wait and see how
this pans out.
JD Sports has a lot of work to do
in cracking the US with its Finish Line fascias but there is hope that
management is well experienced enough to achieve it. The problem is the shares
are priced for perfection and with the big brands shifting more and more to
direct sales, the US will be difficult. But betting against Cowgill and co has
not paid off yet. Shares could dip.
Betting against Superdry on the other hand….has
worked out pretty well. In an update today management say the peak trading performance has been lower than expected as
the business continues the ‘strategic transition to a full price
stance’. As we noted with Marks and Spencer, discounting is murder if you
don’t have the brand power to avoid it. Superdry saw lower than anticipated
retail sales of £23m since Black Friday, predominantly online.
The numbers are woeful – group
revenue -15.8%, in-store revenues -18.5% and wholesale revenue -16.9%.
E-commerce revenues dropped by more than 9%. Profits are now see between £0 and
£10m. Shares could be down around 20% on this. Julian Dunkerton has an awful
lot of work to go – does the full price strategy actually have legs? Sales are
being hammered – margin gains may be for nought.
Joules’ run of luck has come to an end. Posh wellies may be a niche
market after all. Full year profit before tax will be significantly below
market expectations. Retail
sales over the seven-week period to Jan 5th were significantly
behind expectations and decreased by 4.5% against the prior year. A weak online
sales performance was to blame, which management explains was “due to an
internally generated stock availability issue through the important end of
season sale event, the cause of which has now been addressed”. In other words
they mess up on stock just like Marks & Spencer did. Too many posh wellies?
Not enough polo shirts? Who can say, but shares seen at least -10%.