Earnings This Week: Carnival, Micron and Next

Earnings calendar: March 27 – 31

The calendar is quiet ahead of earnings season next month.

Atop the agenda is cruise line operator Carnival, memory chipmaker Micron, athleisure maker Lululemon and pharmacist Walgreens Boots Alliance.

In the UK, there will be results out from clothing and homeware retailer Next, housebuilder Bellway, IT infrastructure provider Softcat, and Ocado’s grocery venture with Marks & Spencer Group.

Below is a calendar of the top earnings we are keeping an eye on:

Carnival

Cruise line operator Carnival is working to steady the ship following the rocky waters it has endured since the pandemic. The company delivered positive adjusted Ebitda for the first time since the pandemic in the second half of the last financial year and this is expected to improve markedly to $304.3 million in the first quarter. That is expected to accelerate significantly in 2023. Its adjusted loss per share at the bottom-line is expected to come in at $0.60. That would represent a big improvement from the $1.66 loss seen the year before but Wall Street believes this will remain in the red until the 2024 financial year. Any signs this could be achieved sooner would be bullish for the stock, which is up over 14% since the start of the year but still trading at just a fraction of its value back in early 2020.

Micron

The memory chip market remains subdued and, as a result, prices are weak. The result is set to be a 52% drop in sales $3.74 billion, marking a third consecutive quarter of declines, and significantly tighter margins. That is set to see Micron report a second consecutive quarter of losses, with its adjusted loss per share expected to come in at $0.63. Markets believe sales will remain under pressure for the rest of the financial year before recovering in the next, providing little hope in the near-term. Markets thinks losses will bottom-out in the third quarter but it will take longer to return to profit because its margin remains under severe pressure. With this in mind, markets want to see cost-cutting efforts to protect profitability and evidence that its efforts to rebalance the supply-demand issues, having already cut back on production of wafers, are starting to pay off.

Lululemon

Lululemon continues to deliver at a time when other retailers are being plagued by excess inventory, heavy discounts and rising costs. Comparable sales are expected to accelerate for a third consecutive quarter to 19.6% at constant currency and revenue is expected to rise 27% from the year before to $2.69 billion. These levels of growth are all the more impressive considering it is generating twice as much revenue now than it was before the pandemic. Traffic in stores remains healthy and online sales continue to grow at double-digit rates. Adjusted EPS should be up 26% to $4.26. The outlook will be keenly watched, with the reopening of China holding the potential to provide a new tailwind in 2023. Lululemon shares are up only 21% above pre-pandemic levels despite the significant improvement in sales and profits delivered over the past three years.

Ocado and Marks & Spencer’s

We will get an update from the 50:50 grocery joint venture between Ocado and Marks & Spencer Group this week. We have seen any hopes of profitability dashed as inflationary pressures, higher marketing costs and the need to invest in growth hammered its bottom-line last year. Plus, customers are buying smaller baskets as they grapple with the cost-of-living crisis. New CEO of the grocery venture, Hannah Gibson, has been tasked with recovering revenue and margins this year and expects some of the headwinds to ease. That will be all the more important considering growth is much harder to come by. Retail revenue is forecast to rise by a tepid 0.9% year-on-year to £570 million in the first quarter. Growth has slowed but sales have grown significantly since the start of the pandemic. The retail venture is forecast to deliver 7% growth in revenue over the full year and deliver an, albeit small, positive adjusted Ebitda.

Next

Next is forecast to report a 5% rise in annual sales to £5.1 billion in 2022 and a 4.6% increase in pretax profits to £861.3 million. Full price sales are expected to rise 29.8% in 2022, more than double the pace we saw in 2021 as demand remains healthy even after raising prices to offset higher costs, which is also helping protect profitability. Next said it was ‘cautious’ about the year ahead when it released its last trading statement back in January, when it issued preliminary guidance for full price sales to fall 1.5% and for profits to drop 7.6% to £795 million. That suggests both growth and profits have peaked. However, Next tends to low-ball its initial view and then upgrade it as it gains more clarity on what lies ahead. Plus, sales and profits are still considerably larger than before the pandemic and yet the share price is still almost 6% below where it sat before the Covid-19 crisis derailed markets back in early 2020. In turn, that has spurred-on a rally in the Next share price, which has popped almost 50% since bottoming-out last October.