Earnings This Week: Sainsbury’s, AO World and Levi Strauss

Earnings calendar: July 3 - 7

There are not too many results to watch out for this week as we reach the quiet period ahead of the next US earnings season that starts in July. Levi Strauss is the only noticeable stock to provide an update in the US this week.

The UK is slightly busier, with updates out from supermarket Sainsbury’s, electronics retailer AO World, van rental outfit Redde Northgate and flexible office provider Workspace.

Levi Strauss stock: Q2 earnings preview

Wall Street forecasts Levi Strauss will report an 8.9% year-on-year fall in sales in the second quarter to $1.34 billion as a sharp decline in wholesale more than offsets growth from its direct-to-consumer business. A reversal of fortunes in the Americas compared to the last quarter and continued weakness in Europe is forecast to counter ongoing growth in Asia. Analysts anticipate adjusted EPS will plunge 88% to come in at just $0.03. That would mark the fourth consecutive quarter of lower earnings as profitability remains under pressure from rising costs. In fact, its forecasted operating margin of just 2% would be the lowest on record in three years! The company is currently aiming to grow sales by 1.5% to 3% over the full year and deliver adjusted EPS of $1.30 to $1.40. That would be down from the $1.50 we saw last year and markets believe it is currently on track to hit the bottom-end of that range, suggesting there are doubts over the outlook and that Levi Strauss needs to install some confidence behind its guidance.

AO World share price: FY earnings preview

AO World has already confirmed that revenue dropped by around 27% in the year to £1.13 billion, which will place the onus on earnings. AO World has been focused on reducing costs and improving margins this year, which is set to yield significant results considering analysts expect it to squeeze out a pretax profit of £12.3 million. While small, that would follow on from the losses we saw in 2022 as demand for electronics started to be tested and inflation ripped through markets. Adjusted Ebitda – a key metric – is forecast to come in at £43 million, well ahead of the top-end of its guidance range at £30 million. This momentum should continue in the new financial year, when markets believe it can more than double pretax profits! The outlook will therefore be key, with analysts hoping AO World can target adjusted Ebitda of around £59 million in the coming 12 months. Meanwhile, AO World recently counted Frasers Group, the owner of high street stores from Sports Direct to online sites like Debenhams, as its new largest shareholder after striking a strategic partnership with the firm. Frasers said it will tap into AO World’s expertise in electricals and make use of its two-man delivery teams for bulky orders of larger products, while AO World said there was ‘significant potential’ to help it deliver profitable growth. Frasers has continued to up its stake since then, with its interest now standing at over 22%.

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