BUSINESS LIVE: Boohoo sales slump; AstraZeneca to pay $435m settlement; Greggs revenues soar

Oil services company Petrofac has received a more than $600 million contract from ADNOC Gas for the Habshan carbon capture and storage project, as the Abu Dhabi-based company ramps up its decarbonization plan.

The contract includes the supply of carbon capture units, associated pipeline infrastructure and a network of carbon dioxide recovery and injection sources, the London-listed company said in a statement.

Petrofac shares rose 1.6 percent in early trading

Food prices fell last month for the first time in two years, providing some relief to struggling shoppers’ budgets.

Prices fell 0.1 percent month-on-month in September, according to data from the British Retail Consortium (BRC).

However, prices were still 9.9% higher than in September last year, although annual inflation was slower than the 11.5% increase in August.

The decline was driven by fresh food inflation, which fell to 9.6% in September from 11.6% in August, the lowest level in fourteen months. The decline came as headline retail price inflation fell from 6.9% to 6.2% on an annual basis, the lowest level since September 2022.

According to the BRC, ‘fierce’ competition between retailers, helped by easing cost pressures, has contributed to the month-on-month decline in food prices.

Mark Crouch, analyst at trading and investment platform eToro:

“Greggs has delivered another robust update for investors, with a big revenue increase in the third quarter. An important driver of this increase is the development of evening trading, which now accounts for almost a tenth of all sales. The country’s favorite baking app is also proving to be a hit with customers.

‘The growth prospects also look good. Greggs expects to open a net 135 to 145 new stores this year, which would be a record. Add to that the major expansion of its delivery service, which will see 500 stores live on the Uber Eats platform by the end of the month, and there is potential for serious growth.

‘Let’s also not forget that the economic outlook is still quite bleak and many people are still struggling, even if inflation is coming down somewhat. It’s these types of conditions that allow value-focused companies like Greggs to thrive.”

London-listed shares are trading lower this morning, under pressure from energy and mining companies, as prices of most commodities fell due to a stronger dollar, while Boohoo shares have slumped after the fashion retailer signaled a fall in annual sales.

Industrial metals miners fell 0.4 percent, while precious metals miners fell 1.1 percent, tracking the prices of metals including copper and gold.

The dollar hit a new 11-month high against major peers after the US government avoided a partial shutdown, while manufacturing data fueled expectations that the Federal Reserve will keep interest rates high for longer.

Boohoo fell 10 percent as the online fashion retailer said its sales fell 17% in the six months to August and warned of a similar decline for the full year due to a slower-than-expected recovery in sales volumes.

Josh Warner, market analyst, City Index:

‘That will be a difficult update for investors as it ultimately means it will take longer for Boohoo to turn its fortunes around than previously hoped.

‘The company has done well to clear inventories, but sales are now set to fall by double digits for the full year and it signals that Ebitda is also at risk of falling – after previously indicating both metrics would grow .

‘That suggests Boohoo is in a similar position to its rival ASOS, which last month revealed it has also shifted more stock than expected but also cut its guidance as sales remain under pressure.

‘Investors may be concerned that the challenging economic outlook could spell more trouble for the pair in the future, with signs of a slump in consumer spending already hitting the pair’s expectations.’

Matt Britzman, equity analyst at Hargreaves Lansdown:

‘The beloved bakery chain continues to surprise. Greggs is starting to build quite a reputation for delivering strong results, and today’s update certainly hasn’t bucked that trend.

‘Once praised for its sausage rolls, Greggs has worked hard to expand the menu while retaining its core value offering. Meanwhile, growing delivery services (like the new partnership with Uber Eats), click & collect options and later opening hours make it easier than ever to get your bakery fix.

“Inflated costs are starting to come down, which will allow more room to maneuver on the pricing front in the second half of the year. Don’t be surprised if you see a slight cooling effect on like-for-like sales from here, as it surpasses last year’s periods when prices rose higher.

“In the long run, though, it’s a win: less pressure on costs makes it easier to keep prices under control and preserve the coveted value offering.

“Bears will argue that the valuation doesn’t leave much room for error, and they’re right. But with good food comes even greater expectations and Gregg’s broader shoulders seem strong enough to support that weight.”

Greggs maintained its full-year guidance after underlying sales rose in the third quarter and gained market share, demonstrating the resilience of the baker’s value offering in a cost-of-living crisis now in its second year.

Greggs also said on Tuesday that cost inflation had eased as 2022’s significant commodity-led increases were annualized.

The group’s sausage rolls, steak pies, vegan snacks and sweet treats have caught the attention of Britons whose incomes have been hit by high inflation. The shares are up 45 percent in the past year.

Greggs’ like-for-like sales at company-operated stores rose 14.2 percent year-on-year for the thirteen weeks to September 30, its third fiscal quarter, after rising 16 percent in the first half. Total turnover increased by 20.8 percent.

AstraZeneca will pay $425 million to settle product liability lawsuits against its prescription heartburn drug Nexium and Prilosec for heartburn in the US, the drug giant said on Tuesday.

The agreements effectively resolve all pending claims filed against the company for failing to warn patients about the risk of contracting chronic kidney disease and related problems, except one in Louisiana, AstraZeneca said – the trial of which is scheduled to begin in April next year .

The company added that it has made a provision for the settlement payment.

Embattled online fashion retailer Boohoo has warned that full-year sales could fall by as much as 17 percent from 2022 levels following a slower recovery in sales volumes.

The group reported pre-tax losses that increased to £26.4m in the six months to the end of August, up from £15.2m a year ago.

On an underlying basis, this was a pre-tax loss of £9.1 million, compared to a profit of £6.2 million a year earlier.

John Lyttle, group CEO, said:

“In the first half of the year, we made significant progress on key projects and initiatives, including the launch of our U.S. distribution center.

“We have seen significant improvements in procurement lead times and invested in pricing to strengthen our value credentials.

“We have identified over £125 million in annualized cost savings that support our investment programme.

‘Our confidence in the medium-term prospects for the Group remains unchanged as we execute on our key priorities, seeing a clear path to improved profitability and a return to growth.’