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What can investors expect in March?

George Salmon takes a look ahead to an important month for the UK economy

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Hopefully the Brexit fog will clear next month.

But that’s far from the only news investors should expect. Some of the biggest names in food and general retail will release results, before the UK’s scheduled departure from the EU at the end of March.

With that in mind, we look at three things investors should look out for in the coming weeks:

A food fight

With competition ramping up, supermarkets could do without extra headaches. Unfortunately, some we’re hearing from next month will be licking self-inflicted wounds.

Ocado will be giving an update on its first quarter performance, a period that included a major fire at one of its automated warehouses. News of the accident sent shares tumbling.

While Ocado warned sales would be impacted, we’re yet to find out exactly by how much. However, this year’s sales aren’t that relevant in the grand scheme of things. The investment case at Ocado is all about the potential to attract retail partners to licence out its patented systems. While any new deals are unlikely to be announced with first quarter numbers, Ocado could comment on where potential partners’ interest levels are. Just this week the group announced a joint venture with M&S, so clearly the fire hasn’t put everyone off.

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And Ocado’s not the only one with things going up in smoke. 13 March is the deadline for Sainsbury to respond to the CMA’s damning ruling on the proposed merger with Asda. It said the current deal – which would create the UK's largest food retailer – would lead to substantial lessening of competition.

Suggested compromises are pretty tough – like selling one of the brands, or unloading a large number of stores. As the deadline approaches, all eyes will be on the group’s next steps.

Find out more about Sainsbury

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We’re also expecting full year results from Morrison on 13 March.

Given its lower-price offerings, increased competition from German discounters is a worry. Investors will hope transaction numbers remain steady, and that prices aren’t being pushed too low.

On the plus side, we think like-for-like sales should be moving in the right direction – something not all supermarkets are managing. But it’s important to check the rate of growth doesn’t slow significantly – it could be a sign of trouble ahead.

Find out more about Morrison

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High (street) hopes

News of ailing retailers is rife. And with UK high street footfall recently hitting 10 year lows, things aren’t getting much easier.

With that in mind, we’re due to hear from Next.

Attention will be focused on online sales. A continued strong showing from this business is keeping things ticking over while performance from the main stores has faded.

It’s important Next is set up to reach next year’s target of 11% online sales growth. And this year’s results will tell us if this looks likely.

Find out more about Next

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Some way up the high street lies Ted Baker. We’re due to hear from the floral-print specialist on 21 March.

Over 40% of Ted’s sales are derived outside the UK, which gives it some protection against the ill wind sweeping through the UK’s high street. But it’s not all completely rosy.

Founder and CEO Ray Kelvin has taken a leave of absence following misconduct allegations in December. A 12% increase in sales over Christmas implies customers haven’t been put off by coverage of the issues, but growth is coming at the expense of gross margins, while new openings and the mushrooming online business are masking weaker in-store sales.

Investors will be interested to hear more about what Ted thinks of the current climate, and if what it’s doing to combat those tough in-store trends.

Find out more about Ted Baker

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As we all know, March 29 is the date the UK is due to leave the EU.

But progress towards a deal has been limited, so whether or not that actually happens remains to be seen. We still can’t rule out alternatives such as an extension to the negotiation period or another referendum. March holds the key to whatever lies in store.

The outcome for the economy will depend on which path Brexit takes. But with Philip Hammond’s Spring Statement scheduled for 13 March, investors can expect some economic news before the UK’s departure date.

Latest figures show Britain’s experiencing the biggest January budget surplus on record. Income from taxes outweighed government spending by £14.9bn.

That could mean Mr Hammond is on course to announce the lowest level of government borrowing in nearly twenty years. That’s important, because it would help bolster the UK’s balance sheet before what might be a bumpy few months.

The final piece of headline-grabbing news will come in the Monetary Policy Committee’s interest rate decision on 21 March. General consensus is interest rates won’t be raised above their current 0.75% levels, influenced by lower than expected inflation levels.

So, while the main event in March will be Brexit, there’s some important news in the pipeline that will signal the UK’s readiness for what may lie ahead.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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