(Bloomberg) — Fashion retailers Zalando SE and Inditex SA take up the mantle next week as Europe’s earnings season draws to a close. With low-cost rivals nipping at their heels, they’re trying to bolster margins and keep inventory at manageable levels.
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Gross margins could edge higher for both companies, Bloomberg Intelligence said, although growth trajectories remain uncertain. Online retailer Zalando is boosting its marketing spend in a bid to return to sales growth in 2024, while Zara-owner Inditex is betting on a resurgence of in-person shopping and investment in its flagship stores, particularly in the US.
Cost cuts could boost profitability for food delivery company Deliveroo Plc, also in next week’s lineup, but persistently weak growth may weigh on the outlook. German peer HelloFresh SE on Thursday issued full-year guidance that fell short of estimates, amid falling demand for meal kits, and said it’s unlikely to meet its 2025 goals.
Italian insurer Assicurazioni Generali SpA is in focus after Bloomberg reported it may be limbering up for consolidation in Italy’s financial sector. In the Middle East, oil giant Saudi Aramco’s capital expenditure strategy for the year will be parsed after the kingdom’s decision to abandon plans to boost output capacity in January.
Highlights to look out for:
Sunday: Saudi Aramco’s (ARAMCO AB) profit likely remained under pressure last quarter on lower oil prices, smaller refining margins and a limited contribution from Sabic, BI said. The decision not to raise production capacity will lower spending and allow for a higher dividend payout. At the same time, sustained voluntary output cuts will keep production shy of 9 million barrels a day even though macro conditions both upstream and downstream are healthy. The government transferred another 8% stake — worth almost $164 billion — to its sovereign wealth fund, the Saudi Press Agency said on Thursday.
Monday: No major earnings of note
Tuesday: Weaker quarterly delivery numbers, especially in China, point to muted full-year results for luxury automaker Porsche (P911 GY), with 2023 revenue seen at the lower end of the guided €40 billion ($43.8 billion) to €42 billion range. Part of the China softness is driven by a strategy to protect prices, something Porsche doesn’t get enough credit for, said Deutsche Bank’s Tim Rokossa. While prevailing supply chain disruptions and new product launches may weigh on 2024 earnings, Porsche’s order situation looks “very solid” and it should guide for a 16% to 18% margin, he said.
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Assicurazioni Generali (G IM) is expected to report a 4.5% increase in operating profit for 2023, driven by its life segment, which should show 4.9% growth. Analysts will seek details on dividends and buybacks after Chief Executive Officer Philippe Donnet said the company could boost payouts under a new strategy plan. The company is surveying takeover candidates in a wish-list that includes Aviva Plc and NN Group NV, Bloomberg reported this week.
Wednesday: Zara-owner Inditex (ITX SM) is expected to stand out in a weak consumer environment thanks to its fashion credentials, flagship stores and short supply chain, BI said. Full-year revenue probably grew 10% and operating profit 23%, consensus shows. The gross margin is also expected to inch up as the retailer benefits from favorable currency movements, lower input costs and trendy collections driving full-price sales. Strong free cash flow generation should spur shareholder returns, although a lack of guidance upgrade could disappoint, according to Jefferies.
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Zalando’s (ZAL GY) gross margin likely swelled in the fourth quarter, in part because inventory fell faster than sales the quarter before, BI’s Tatiana Lisitsina and Charles Allen said. Revenue should return to growth in 2024, although it remains to be seen whether Zalando can accelerate gross merchandise volume, with ultra-fast fashion giants such as Shein closing in. To thrive, it will need to juggle maintaining a personal touch in an “overly broad” product range, the analysts said.
Thursday: Deliveroo (ROO LN) said 2023 adjusted Ebitda would probably top its guidance range of £60 million ($77 million) to £80 million in a trading update in January. While orders likely returned to growth last quarter, the company’s cautious tone on the growth outlook for 2024 may challenge consensus, BI’s Diana Gomes said. Heightened competition in key markets combined with easing inflation could result in a smaller lift to average order value, although it may ease pressure on customer wallets, Gomes said.
Friday: No major earnings of note
–With assistance from Isolde MacDonogh, Antonio Vanuzzo, Laura Alviž, Verena Sepp and Andrey Biryukov.
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