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

Josh Warner, market analyst, City Index:

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

‘The company did well to clear inventory, but sales are now set to drop by double-digits over the full year and it has signalled that Ebitda is also at risk of falling too – having previously signalled that both measures would grow.

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

‘Investors may be fearful that the challenging economic outlook could cause more trouble for the pair going forward, with signs of a pullback in consumer spending already having hit the pair’s guidance.’

Matt Britzman, equity analyst at Hargreaves Lansdown:

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

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

‘Inflated costs are starting to ease, which gives more wiggle room on pricing over the second half. Don’t be surprised to see a slight cooling effect on like-for-like sales from here, as it laps periods last year when prices moved higher.

‘It’s a win in the long run though, less pressure on costs makes it easier to keep prices in check and retain that coveted value offering.

‘Bears will argue the valuation doesn’t leave a whole lot of room for error, and they’d be right. But with great food comes with even greater expectations and Gregg’s broadening shoulders look strong enough to carry that weight.’

Greggs has maintained its full-year outlook after underlying sales rose in the third quarter and it won market share, demonstrating the resilience of the baker’s value offer in a cost of living crisis now into a second year.

Greggs also said on Tuesday the rate of cost inflation had eased as it annualised the significant commodity-led increases it saw in 2022.

The group’s sausage rolls, steak bakes, vegan snacks and sweet treats have chimed with Britons whose income has been dented by high inflation. Its shares are up 45 per cent over the last year.

Greggs’ like-for-like sales in company-managed shops rose 14.2 per cent year-on-year over the 13 weeks to 30 September, its fiscal third quarter, having been up 16 per cent in the first half. Total sales rose 20.8 per cent.

AstraZeneca will pay $425million to settle product liability litigations against prescription-only acid-reflux medicine Nexium and heartburn drug Prilosec in the US, the drugs 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 issues, except for one in Louisiana, AstraZeneca said – the trial for which is scheduled in April next year.

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

Embattled online fashion retailer Boohoo has warned full-year revenues could fall by as much as 17 per cent on 2022 levels after a slower recovery in sales volumes.

The group reported pre-tax losses widening to £26.4million in the six months to the end of August from £15.2million a year ago.

On an underlying basis, it swung to a pre-tax loss of £9.1million from profits of £6.2million a year earlier.

John Lyttle, group CEO, said:

‘Over the first half we have made substantial progress across key projects and initiatives, including the launch of our US distribution centre.

‘We have seen significant improvements in sourcing lead times and invested in pricing to reinforce our value credentials.

‘We have identified more than £125 million of annualised 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 where we see a clear path to improved profitability and getting back to growth.’