The week ahead – UK Retail Sales, Unilever, Tesla, Boeing and Alphabet results

UK Retail Sales (Mar) – 25/04 – having seen the UK economy grow by 0.5% in February there may well be a case for arguing that the recent doom and gloom may well be overdone, after showing stagnation in January. The 0.5% expansion was especially surprising given how low the bar was set on expectations, as well as the weakness shown in recent PMI numbers. Truth is the monthly numbers tend to be volatile, and while a jump in services output is welcome there might be a case for arguing that the incoming nature of US tariffs may well have prompted a bump forward in economic growth as companies looked to get ahead of higher prices. We also saw a decent rebound in manufacturing and construction output as well which helped to boost economic output. The UK consumer has proved to be fairly resilient so far this year with solid gains in both January and February consumer spending of 1.7% and 1% respectively, both well above expectations. The bigger question is whether this pace can be maintained. The latest inflation numbers showed a slowdown in March, which was very welcome as the decline in oil prices prompted a slide in petrol prices, offering a respite to hard pressed consumers wallets. There’s certainly a big benefit to a 10p drop in the price at the pumps which we’ve seen over the past few weeks. Be that as it may with the bombshell that is April and the various tax and price rises set to kick in it wouldn’t be a surprise to see consumers retrench ahead of April avalanche of tax and price rises.                

Manufacturing and Services flash PMIs (Apr) – 23/04 – these are almost like a broken record with manufacturing stuck firmly in contraction across Europe with France, Germany and the UK all reporting weak manufacturing output. In March we saw France post 48.5, Germany 48.3 and the UK slip to 44.9. Services remain the life jacket keeping the respective economies afloat, although in France this sector is also weak. In Germany and the UK, we remained in positive territory in March at 50.9 and 52.5 respectively. This month’s UK number however will be the first one where companies’ costs will see higher tax charges in the form of National Insurance and minimum wage contributions, which could act as a drag.                        

Unilever Q1 25 –24/04 – when Unilever reported its full year numbers in February the shares took a nosedive the shares tumbling back to levels last seen in July last year. The market reaction was particularly concerning given that management announced a 6.1% rise in the quarterly dividend, and a €1.5bn share buyback. On any metric, sales growth of 4.2% was solid, with a 12.6% rise in underlying operating profit also reasonably acceptable. Margins also looked solid at 18.4%, a 14.7% increase, however the company’s cautious outlook when it came to looking towards the new fiscal year clearly spooked some investors. Underlying sales growth of between 3% and 5% for 2025, and an increase in underlying operating margin to 19.6% in H2 appear to suggest a management who are keen to hedge their bets. This caution is certainly understandable given global events since then, with the shares slowly recovering that lost ground. The decision to spin off the ice cream business as a separate listing is also a sensible one given the headaches management in Unilever have had with the Ben & Jerrys part of the business, as well as their political activism. As we look towards the rest of the year investors will be looking to see whether the caution merited at the beginning of February was justified and whether management continues to be optimistic about the direction of travel as far as H2 is concerned.              

Reckitt Benckiser Q1 25 - 23/04 – when Reckitt Benckiser reported in March the shares popped higher to their highest levels in a year before slipping back. All in all, the results were solid with net revenue of £14.2bn, a like for like increase of 1.4% with an adjusted operating margin of 24.5%, an increase of 140bps. The strong areas of the business were in hygiene and health which saw solid gains in revenue. The weak area was in nutrition which saw a -7.3% decline in net revenue as its acquisition of Mead Johnson in 2017 continues to give that part of the business a continued bout of indigestion. For 2025 the company said it expects to see 3% to 4% LFL net revenue growth in what it calls Core Reckitt with balanced delivery across H1 and H2. Core Reckitt accounts for 71% of group revenue and consists of 11 Powerbrands including Dettol, Nurofen, Finish, Strepsils, Durex, Gaviscon and Vanish. The company also said it remains on track to exit Essential Homes by the end of the year, while evaluating opportunities for Mead Johnson Nutrition, which accounts for 15% of group revenue.             

Tesla Q1 25 – 22/04 – since hitting a new record high of $488 at the end of last year, Tesla’s share price has more than halved as a combination of a backlash against CEO Elon Musk, as well as increased competition hammered the share price. When Tesla reported its end of year and Q4 results at the end of January there was already clear evidence that sales were slowing after noting an 8% decline in automotive revenue. Despite this slowdown we did see a 2% increase in total revenues to $$25.7bn, helped by a sharp rise in energy generation and storage revenue of 113% to $3.06bn. These trends were also reflected in the annual numbers as total automotive revenues for 2024 fell 6% to $77.07bn even as total revenues increased 1% to $97.69bn. The reduction in average selling prices is one reason behind the slowdown in revenues even as total deliveries increased in Q4 to 495.5k, a 2% increase. On an annualised basis deliveries were lower than in 2023, falling by 1% to 1.79m, even as the number of Tesla locations increased 13% to 1,359. On energy generation and storage, the company is seeing a much bigger contribution when it comes to revenue as the number of supercharge connectors and stations rose by 19% and 17% respectively. This trend of weaker revenues is likely to be replicated in the upcoming Q1 numbers after the electric car maker reported a 13% fall in deliveries earlier this month to 336,681, the worst performance in over 2 years. Even without the backlash against Musk, Tesla was already facing a reckoning when it comes to its revenues on its cars, as it reacts to increased competition with lower prices as it looks to compete with BYD in China, but also from legacy automakers whose electric car offerings start to become more compelling. These discounts at the end of last year saw its full year operating margin fall to 7.2%, and annual profits fall by 53% to $2.04. Profits for Q1 are expected to come in at 44c a share.         

Boeing Q1 25 – 23/04 – you couldn’t ask for more of an American icon than Boeing, and yet here is a company that has staggered from one disaster to another in the last 5 years. The share high point was back in 2019 before the shares plunged in the wake of the crashes of 2 Boeing 737-MAX 8 aircraft both of which pointed to safety failures in the MCAS cockpit control software, and shattered confidence in the aircraft across the industry when it became apparent that Boeing knew about the problems it was causing. Once this became known and subsequent investigations uncovered a litany of other problems with the company’s safety processes leading to significant financial losses, as well as a loss of reputation. There was a time back in the 1980’s when Boeing was a byword for reliability, passengers and pilots alike used to say “if it’s not Boeing I’m not going”. This has changed in the last 5 years to the point a lot of passengers were, and still are saying “if it's Boeing, I’m not going”, with many passengers actively boycotting routes that use Boeing aircraft. It’s very true what they say, trust is very hard earned, but only takes a minute to destroy, and Boeing’s recent troubles are a good example of that truism. Even President Trump has taken aim at Boeing for their failure to deliver two new Airforce One aircraft, which were signed off in his first term and should have been ready to fly by now, and have been delayed again until 2027 or 2028. In reality the company is still in a shambles, having to cope with strikes from a disgruntled workforce on top of all its other issues. The company is not only having problems with its civil aviation business but also in its space division after 2 astronauts were stranded on the ISS in June after the Boeing Starliner capsule reported a malfunction. Last year the company lost $11.8bn, with the 3 months to the end of last year costing it $3.8bn due to strike action. Boeing last posted a profit back in 2018 and with the business continuing to face an uphill task when it comes to repairing its reputation we can expect many more difficult quarters for this iconic American brand. The FAA currently has a production cap of 38 Boeing 737 MAX 8 aircraft per month, after the loss of a door plug on an Alaskan Airlines flight in 2024, until the company can prove it has got on top of its quality control issues with Boeing management hopeful that this will be increased to 42 by the end of the year.

Alphabet Q1 25 – 24/04 – having seen the shares hit a new record high in early February the shares have gone one way since then, sliding lower despite a very healthy set of Q4 results to round off another record year for the Google and YouTube owner. Q4 revenue of $96.47bn, a 12% increase on 2023 and profits of $2.15c a share. Annual revenues of $350bn, up from $307.4bn. Cloud revenue came in at $11.96bn, a decent increase on last year’s $9.19bn, but below market expectations which just goes to show sometimes you just can’t win no matter how well you do. The company reported Solid growth in all areas – search rose from $48bn to $54bn. Advertising also saw a sizable jump to $72.46bn, while YouTube also saw a rise from $9.2bn to $10.47bn. Profits increased sharply in both services and cloud, although losses increased in the other bets division which includes Waymo to $1.17bn. One other reason for the share price slide could have been the company’s announcement it intends to spend $75bn as it looks to expand on its AI capabilities, with $16bn to $18bn coming in Q1. Will this be money well spent when you have the likes of DeepSeek claiming AI success on a fraction of the cost? Profits for Q1 are expected to come in at $2.02 a share.