Next week on the stock market

What to expect from a selection of FTSE 100, FTSE 250 and selected other companies reporting next week:

• Associated British Foods set for moderate profit growth
• Progress in the US will be key for Fevertree
• Will Inditex remain in fashion with consumers?

Among those currently scheduled to release results next week:

*Events on which we will be updating investors.

Associated British Foods - Aarin Chiekrie, Equity Analyst

In June, we heard that revenue at the key Primark business grew at double-digit rates thanks to higher prices and volumes. Market share has also been on the rise in the UK, as some consumers moved to lower-priced clothing to help ease the pressure on their wallets. And with all other business divisions growing the top line too, Associated British Foods expects full-year underlying operating profits to be moderately ahead of the previous year.

Next week’s trading statement should give some insight into how well cash flows are being managed. Spending £140m on share buybacks and increasing inventory levels in the Sugar and Primark businesses meant that free cash flow turned negative in the first half. We’re hoping to see that a good chunk of those stockpiles have unwound over the second half, helping to push cash flows back in the right direction. But just how much progress has been made by next week’s results will likely have a direct impact on the group’s ability to fund future dividends and share buybacks and no shareholders returns are guaranteed.

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Fevertree – Matt Britzman, Equity Analyst

Fevertree’s lofty valuation, currently just shy of 50 times forward earnings, means there’s always pressure to deliver when it comes to earnings season. But there are a few things in particular to watch for in next week’s half-year results. First and foremost is overseas expansion, specifically in the US, arguably a main reason for the high growth valuation. Delays in ramping up bottling production last year meant the group relied on shipping to serve US customers, leaving it at the mercy of inflated freight costs and port congestion. With signals earlier in the year suggesting issues have been ironed out, we’d like to see some benefits feeding through to the bottom line.

Margins are also in focus, with cost-cutting exercises expected to yield some results as we move through the year. Nonetheless, analyst consensus sees profit before tax margin falling from 9% to 7% this year with annual improvements coming in the 2024 financial year.

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Inditex – Aarin Chiekrie, Equity Analyst

Inditex owns fashion favourites like Zara, Pull&Bear and Bershka. The group had a strong start to 2023, with first-quarter sales up 15% to €7.6bn on a constant currency basis. This strong growth across all geographies and brands highlights the success of Inditex’s strategy to close smaller stores and focus on bigger ones in prime locations. But it’s worth remembering that operating expenses are also increasing at double-digit rates, so a continued focus on cost management will remain key.

Next week’s results should also give an early peek into how well customers have received the new Autumn/Winter collections. While we think it’s one of the better-placed fashion retailers, Inditex’s relatively high clothing price point and lofty valuation compared to peers brings with it an element of risk, and means there’s continuous pressure to continue delivering strong growth. Analysts are expecting operating profit to rise 12.1% in the second quarter, and any slip-ups on this front will likely be punished.

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