Sainsbury’s (LON: SBRY) and Asda will reveal details of a new shock deal between the two supermarkets.
Revealed on Saturday, the pair is in talks over a £15 billion merger that could result in a retailer more powerful than the current leader, Tesco.
The proposed deal triggered fears of job losses, with Joe Clarke, the acting national officer of the United union, calling the deal an “absolute shocker”.
“Staff are already facing uncertainty through restructuring and changes to contracts at [Sainsbury’s]. Sainsbury’s bosses need to give workers clarity over what the future could hold and assurances over jobs as matter of urgency,” he said.
The deal between the supermarkets could lead to thousands of job losses as the two chains cut out duplication. Both Asda and Sainsbury’s have already axed thousands of jobs in recent cost-cutting drives.
In a statement released on Saturday, Sainsbury’s confirmed it was in talks with Walmart (NYSE: WMT), which has owned Asda since 1999.
“Sainsbury’s confirms that it and Walmart Inc are in advanced discussions regarding a combination of the Sainsbury’s and Asda businesses.”
The deal will trigger an investigation into the new competition as the enlarged Sainsbury’s and Tesco would control almost 60 percent of the UK grocery retail market.
“This is profoundly not in the public interest. It’s going to have negative consequences for consumers and all the along the grocery supply chain,” said Andrew Simms, the co-director of the New Weather Institute thinktank and the author of Tescopoly.
A senior supermarket executive said the proposed deal would be too difficult to get past the CMA, saying: “This will be much more difficult to get through than the Tesco/Booker deal as it will effectively create a duopoly with 60 percent of the UK grocery market. Last time they made it very clear that the big four [supermarkets] could not become three. It will be a long and challenging process to win approval and could force a lot of store disposals.”
Sainsbury’s will publish a statement describing in more detail the terms of the agreement on Monday morning at 7 am.
Amazon (NASDAQ:AMZN) profits surged 43 percent in the first quarter of the year, driven by online sales in the US.
Sales at the online shopping giant rose to $51 billion in the three months to March, well above analysts forecasts, with net profit rising to $1.6 billion from $724 million in the same period last year.
The performance was largely fuelled by its North American business, which saw sales rise $30.7 billion from $20.9bn in the same period last year. Profit also rose to $1.1 billion from $596 million previously.
The company are also set to hike the cost of their Amazon Prime service, which now has over 100 million users. The cost of the subscription, which allows customers free next day delivery as well as access to music, books and its video streaming service, will increase to $119 per year, effective from 11 May for new subscribers and to renewed subscriptions from 16 June.
Amazon also strong growth at its highly profitable cloud computing division, Amazon Web Services, which hosts the likes of Netflix and Airbnb. The division reported a 49 percent increase in sales to $5.44 billion.
Shares in Amazon surged 7 percent on the news of the results.
Entertainment site owner Merlin (LON:MERL) said trading had been subdued in 2018 so far, impacted by the ‘seasonally quiet’ period as well as weaker demand in the wake of the 2017 terrorist attacks.
Its major London sites, Madame Tussauds and the London Dungeon, reported weaker visitor numbers than the year before, with Merlin saying it reflected “the strong trading in the comparative period and continued impact from the 2017 terror attacks.”
Its major theme parks, including Alton Towers and Chessington World of Adventure, were also impacted by adverse weather conditions in February and March. However, the group confirmed that overall trading within the Theme Parks Operating Groups was in line with expectations.
The company added that its 2018 new business development programme is on track, with all 644 accommodation rooms and one of the nine planned new Midway attractions now open.
The group said that it “remained confident of a recovery over time”.
Shares in Merlin Entertainments (LON:MERL) are currently trading up 0.72 percent to 349.20 (0834GMT).
The Royal Bank of Scotland (LON:RBS) trebled its profit in the first quarter of the year, after a fall in restructuring and running costs paved the way for further recovery.
Attributable profit for the three months through March rose more than three times, up £259 million on-year to hit £792 million.
Pre-tax operating profit rose 70 percent to £1.21 billion, and the group benefitted from not having to set aside any more money to cover costs for payment protection insurance (PPI) mis-selling claims.
However, despite this months strong performance the bank still has the threat of a bit US fine for mis-selling mortgages, that could run between $1 billion -$9 billion.
Ross McEwan, chief executive, said: “This is a good set of results, showing the progress we are making, despite a more competitive market. Our income is up, costs are down and our capital has strengthened again.”
Despite the strong performance, shares in RBS (LON:RBS) are currently trading down 1.54 percent at 269.20 (0822GMT).
Britain’s biggest building supplier Travis Perkins (LON:TPK) reported a 2.4 percent rise in first quarter sales on Friday, despite the adverse weather conditions that had a negative impact on similar companies.
On a like-for-like basis sales rose 3 percent, with the group confirming that expectations for the full year 2018 would remain unchanged after raising prices to cover rising commodity costs.
Its plumbing and heating division saw like-for-like sales jump 19.7 percent, but general merchandising sales fell 1.9 percent. Contracting sales rose just 0.9 percent.
Chief executive John Carter said despite the Beast from the East having an impact on figures, predictions for the full-year reman on track and “are supported by our actions to reduce costs”.
“Whilst the mixed trading conditions in our markets are expected to continue in the near-term, we remain confident in the longer term outlook for the building materials market, with opportunities to grow and outperform through the investments we are making to develop or extend our strong customer propositions.”
Shares in Travis Perkins are currently trading up 0.86 percent at 1,296.00 (0811GMT).
Sales at Homebase slumped 20 percent in the first quarter of 2018, with revenues affected by the “beast from the east”
Like-for-like sales for the Australian-owned DIY chain were down 15.4 percent compared to the same period last year.
Homebase blamed the cold snap in British weather, which affected consumers demand for plants and garden furniture.
Wesfarmers (ASX: WES) bought Homebase for £340 million in 2016.
The Perth-based group have converted 23 of the DIY chain’s 250 stores into the Australian brand, Bunnings. It is unclear whether the Wesfarmers will continue with the refurbishments, which are proving to be costly.
It is understood that Wesfarmers is offering £100 million to find a new buyer, in what was described as one of the most disastrous retail takeovers seen.
Wesfarmers said in February that it was carrying out a business review of the British DIY chain, which could lead to 2,000 job losses and 40 store closures across Britain and Ireland.
Private equity firms including Hilco, Endless and Lion Capital are weighing a potential bid.
Michael Schneider, the Bunnings group managing director, said that “satisfactory progress” had been made on work to increase the performance of Homebase stores in the UK.
Homebase announced in early 2018 that half-year pre-tax losses had fallen to £97 million, compared to a £28 million loss the previous year.
The group has 250 stores and employs 12,000 people in the UK.
Amazon (NASDAQ: AMZN) has reported a 43 percent increase in revenues for the first quarter of 2018.
The retail giant surpassed analyst expectations and the group’s profits more than doubled to $1.6 billion and sending shares to a new high of $1,625.
Stephen Ju, an analyst from Credit Suisse, believes that shares could soon hit $1,800.
“Amazon is one of the best positioned to capture the next wave of retail dollars coming online,” he said.
“Apparel and groceries remain large pools of dollars still left to come online, and Prime Wardrobe and the linkup between Whole Foods Market content and Prime Now distribution will serve as the spearheads to address those opportunities.”
The impressive results come following Donald Trump’s criticisms of the group, who he said do not pay enough tax.
“I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” said Trump on Twitter.
Michael Pachter, an analyst at Wedbush Securities, said: “The best revenge that Bezos can get against the administration for its veiled threats about sales taxes and not paying its fair share.”
Amazon also announced during the earnings call that the cost of a Prime subscription will increase from $99 to $119 per year for US customers.
The increase in costs will result in shipping perks and video streaming for customers.
The online giant is currently the second biggest company worldwide, after Apple (NASDAQ: AAPL). It has a market value of $723 billion and many analysts are predicting it to overtake Apple and become the first trillion dollar company.
Insurance group Hastings (LON:HSTG) reported higher claims costs over the first quarter of the year due to adverse weather conditions, but confirmed it was “on track to deliver targets”.
The ‘Beast from the East’ caused an increase in claims over the period, but the firm said it remained confident of delivering a calendar year loss ratio just below or within the target range of 75 percent to 79 percent. Investors were less sure, however, with the statement sending shares down nearly 7 percent.
In other respects the firm performed well, with Q1 net revenue jumping 12 percent compared to the same period a year ago. Gross written premiums also rose 5 percent, partially offsetting the higher than expected claims costs.
“We remain on track to deliver on our targets, including achieving 3 million customers during 2019 whilst maintaining our underwriting discipline and strong capital position,” the firm said.
Live customer policies increased to 2.67 million, an impressive 10 percent year on year increase, with its share of UK private car insurance market rising to 7.4 percent.
Hastings Group (LON:HSTG) shares are currently trading down 6.81 percent to 260.20 (0848GMT).
Technology and services provider Cobham (LON:COB) saw shares rise nearly 2 percent at market open on Thursday, after reporting fourth quarter trading in line with expectations.
The group said the results were proof its turnaround plan was taking shape, and it maintained its full year outlook on performance.
The equipment supplier said it continues to have “confidence in its medium-term prospects”, adding that it remained focused on mitigating any risks associated with onerous contracts. It also confirmed that it would continue to support tests on both the KC-46 aircraft refueling tanker program under its development and a production contract.
Looking forward, the group said cash generation was likely to be limited in 2018, partly due to the pattern of receipts and payments relating to its onerous contracts, which will likely weigh on cash outflows in the first half of the year.
“Cobham’s turnaround has continued in the first quarter and our overall trading performance within our ongoing business was in line with the Board’s expectations,” said David Lockwood, Cobham Chief Executive Officer.
Shares in Cobham (LON:COB) are currently trading up 1.86 percent at 117.55 (0833GMT).
Aerospace systems engineer Meggitt (LON:MGGT) reported revenue increases across its civil, military and energy sectors on Thursday, sending shares up over 2 percent in early trading.
As a whole the group reported organic revenue growth of 6 percent for the first quarter, excluding the effects of foreign exchange and disposals.
Civil aerospace revenue grew 4 percent, with stronger growth in business jets offset by continued weakness in regional jets and reduced revenue on large jet platforms.
Military revenue increased by 2 percent organically, largely due to sales in its fighter jet division, and energy revenues grew by 39 percent organically, reflecting a weak comparator.
The group said it has made good progress on its recovery plan, and reaffirmed its guidance for organic revenue growth of between 2 and 4 percent.
The results come as Meggitt’s chairman Sir Nigel Rudd faces difficulties from his shareholders, who have concerns of “over-boarding”. Complaints have been raised that Rudd holds too many positions at other companies to dedicate enough time to the role of chair at Meggitt, with proxy adviser firm Institutional Shareholder Services (ISS) recommending in a report that shareholders vote against Rudd’s re-appointment.
