Early Morning Call: Ocado posts £500m full-year loss while retail revenue falls 3.8%

Equity market overview

Equity markets mostly rose overnight in the Asia-Pacific region, in the wake of the rebound of US indices.

In Japan, industrial production fell at its fastest pace in eight months, down 4.6% in January compared to December, more than economists' forecast of a 2.6% decline. Component supply bottlenecks seem to be the main reason for this poor performance. Semiconductor-making equipment was down 26.8%, output of auto products fell 10.1%, and production machinery dropped 13.5%.

In contrast, retail sales posted their fastest growth in nearly two years, rising 6.3% in January from a year earlier, beating a median market forecast for a 4.0% gain, and logging an eleventh straight month of expansion.

In Australia, retail sales rebounded in January, up 1.9% on a monthly basis, after a surprise 4% dive in December. That was higher than the 1.5% anticipated by the market. If we look at bank cards spending data, Australian consumers have preferred splashing out on services, rather than on the goods.

In Europe, equity markets open marginally lower. In France, consumer price index rose 6.2% in February year-on-year (YoY), higher than the 6.1% anticipated. Unlike most western economies, France has not showed signs of receding inflation yet. The harmonised index, the one the European Central Bank (ECB) looks at, rose to 7.2%.

Government measures to support French households have brought down inflation by an estimated three percentage points in 2022. But these measures are coming to an end. Electricity bills have increased by 15% in February, which has led economists to forecast that France inflation will soon be higher than the euro area average.

On the other side of the Atlantic, Canada's fourth quarter (Q4) GDP growth rate is expected at 0.4% compared to the previous quarter.

Macroeconomics

A few macroeconomic indicators are also scheduled in the US: wholesale inventories, S&P/Case-Shiller home price index, Chicago PMI, and conference Board consumer confidence.

Earnings

Elsewhere on the equity market, Ocado posted a half a £501 pretax loss for 2022, £324 million lower than full-year (FY) 2021. The group announced a loss before interest tax depreciation and amortisation of £4m in its retail segment, down for £150m profit a year ago. Revenue at Ocado Retail is down 3.8% to £2.2 billion.

The group says that if customer growth remains robust, revenue was affected by lower basket value.

British asset manager Abrdn also posted a pretax loss for the full-year of £615m compared to a £1.1bn profit the prior year, and signalled a fall in client funds for 2022, down 8% to £500bn.

Bayer, the German agriculture and pharmaceuticals company, posted a marginally higher than expected full-year EBITDA of €13.51bn but warned that its operating earnings are likely to decline in 2023, hurt by higher costs. Bayer sees its 2023 EBITDA between €12.5bn and €13bn.

In the US, Zoom Video Communications shares jumped over 7% in extended trading, after the group forecast an annual profit above analysts' expectations. The group posted earnings of $1.22 per share in the fourth quarter (Q4), on revenue of $1.12bn, both lines beating Sall Street forecasts. For its fiscal 2024, Zoom expects profit of between $4.11 and $4.18 per share, around 50 cents higher than analysts' estimates.

Tonight, after the close of the US market, PC and printer maker HP Inc is scheduled to report earnings and sales for its fiscal first quarter. The market expects earnings of 74 cents per share and revenue $14.15bn.

A year ago, HP posted EPS of $1.10 and revenue of just over $17bn, reflecting an industry-wide fall in PC shipments of 16% in 2022. So far this year, the stock has risen around 9%, but is still down about 25% from its 52-week high last April.