European markets are hovering around the flatline as investors digest a slew of earnings reports. A surge in profits from Marks & Spencer Group (LSE:MKS) has sent the stock to the top of the FTSE 100, lifting other retailers such as Associated British Foods (LSE:ABF), Next (LSE:NXT) and B&M European Value Retail SA (LSE:BME) too.
Germany’s inflation rate hit 3.8% in October, down significantly from 4.5% in the previous month, hitting a more than two-year low thanks to easing food inflation.
In the US, the S&P 500 and the Nasdaq Composite have logged their longest winning streak in two years, but futures are pointing to a slightly weaker open ahead of Fed chair Jay Powell’s comments later today.
ITV (LSE:ITV) said the advertising market “remains challenging” with full-year ad revenues likely to fall by 8% partly due to tough comparables after a strong year in 2022 because of the FIFA World Cup. CEO Carolyn McCall flagged the “challenging macro environment”, which she says is impacting the advertising market and demand for content from free-to-air broadcasters in the UK and internationally.
The broadcaster reported lacklustre total revenue growth of 1% in the first nine-months with strength in ITV Studios partly offset by a decline in TV ad demand amid the structural shift towards streaming away from traditional linear viewing. ITV Studios was a bright spot with revenue growth of 9% thanks to key shows like Fifteen Love on Amazon Prime, World on Fire on BBC and Love Island USA on Peacock. However, Studios revenue is seen slowing to 3% this year, down from 19% last year.
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Its streaming service ITVX had a strong nine months with 27% growth in total streaming hours. It is aiming to achieve £750 million of digital revenues in ITVX by 2026. ITV has been trying to save costs – it says it is on track to deliver £15 million of cost savings this year as part of its previously announced £50 million savings target between 2023 and 2026.
Shares in ITV have slumped by over 5% today, on track for their worst one-day slide in 10 months, reflecting the weak macro backdrop that is weighing on ad spending. This leaves the stock down around 20% so far this year.
In July, the company warned it was in the “worst advertising recession since the global financial crisis” as macro pressures from elevated inflation and higher interest rates take their toll. There’s a mixed assessment from the analyst community with 7 buy recommendations, two holds and two sells on the stock.
Wetherspoon (J D) (LSE:JDW) reported first quarter like-for-like sales in the 14 weeks to 5 November up 9.5%. Chair Tim Martin said “inflationary pressures have eased”, but said energy costs are still far higher than before the pandemic.
Shares in Wetherspoons are trading higher today, extending its year-to-date gain to over 50%. However, the stock has pulled back from the May highs. Demand at Wetherspoons has remained pretty resilient even in the face of a weaker consumer and cost-of-living pressures thanks to its low price point on food and drinks. However, some consumers have been substituting their pub visits for spending on cheaper food and drinks in supermarkets to consume at home instead. Martin has long been vocal about the “tax inequality” that he believes punishes the hospitality sector and favours supermarkets.
The hospitality industry has had a tough time lately, grappling with cost inflation, sluggish demand, strikes, the shift towards working from home, and labour shortages, an issue that’s likely to flare up again over Christmas as companies look to attract seasonal temp workers.
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