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CONSUMER CYCLICALS: Consumer & Transport: Week in Review

CONSUMER CYCLICALS
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Earnings were interesting on troubles from BAT, Randstad, Kering and even from our favoured Coty. Bonds did not move for any of them - keener to ride this week’s strong compression (vs. Bunds, IG -2.5, HY -7). Two weeks ago, we faced the opposite, and we flagged value on VFC, Carnival 30s and Elis 28s - they are holding firm (-30, -27, -2) vs. index -4 (all against swap). This week we turned to primary for value and for the first time this year. 25-30bp NICs on Barry Callebaut being traded away in two sessions. Earnings slows down next week with only Edenred, Carrefour and ISS of note. First M&A supply for the year will also come with Carlsberg 5-part across €/£ out.

  • Randstad faces its 8th straight quarter of revenue falls - and at pace (-6%). Guidance is for that to not change, and it does not bode well for more levered peers, including Adecco. It says the labour market is still “stuck” on low hiring levels and quits. Spain and Italy are the exceptions, US showing signs of turning.
  • Coty; equities drop -15% this week adding to a -60% fall from 2024 highs but still trades on forward earnings multiple within historical ranges. 2H sales growth is now for LSD decline and FY EBITDA is guided to flatline. We are not concerned for the short-end debt, particularly in the face of ample liquidity in Wella stake. Note local issuer JAB, owns 52% of the co.
  • Sudzucker; issues FY26 guidance that remains lacklustre as it rides out EU sugar price falls. We expect rating downgrades. Retail denominated 32s are -18bps tighter after pricing -25bps through our FV in late Jan and the sentiment is helping the non-retail 27s rally in. Sudz is a seasoned operator through cycles – ones that in the past has tested its IG status. Credit seems keen to look past this one.
  • Kering; numbers disappoint by not showing any significant signs of stabilisation. Management says no signs of LFL growth in stores but those with more “newness” are showing more “supportive” trends. It is using that to guide to MSD to HSD LFL growth in stores this year and EBIT to be flat (full here).
  • British American Tobacco comes off an anaemic year and guides for this one to be the same. Add on £6.2b in bulk Canadian litigation settlement and is looking like a lacklustre credit. It is facing market share losses in vapes – a growth segment. Capex spend is not indicative it is in a rush to fix that.

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Earnings were interesting on troubles from BAT, Randstad, Kering and even from our favoured Coty. Bonds did not move for any of them - keener to ride this week’s strong compression (vs. Bunds, IG -2.5, HY -7). Two weeks ago, we faced the opposite, and we flagged value on VFC, Carnival 30s and Elis 28s - they are holding firm (-30, -27, -2) vs. index -4 (all against swap). This week we turned to primary for value and for the first time this year. 25-30bp NICs on Barry Callebaut being traded away in two sessions. Earnings slows down next week with only Edenred, Carrefour and ISS of note. First M&A supply for the year will also come with Carlsberg 5-part across €/£ out.

  • Randstad faces its 8th straight quarter of revenue falls - and at pace (-6%). Guidance is for that to not change, and it does not bode well for more levered peers, including Adecco. It says the labour market is still “stuck” on low hiring levels and quits. Spain and Italy are the exceptions, US showing signs of turning.
  • Coty; equities drop -15% this week adding to a -60% fall from 2024 highs but still trades on forward earnings multiple within historical ranges. 2H sales growth is now for LSD decline and FY EBITDA is guided to flatline. We are not concerned for the short-end debt, particularly in the face of ample liquidity in Wella stake. Note local issuer JAB, owns 52% of the co.
  • Sudzucker; issues FY26 guidance that remains lacklustre as it rides out EU sugar price falls. We expect rating downgrades. Retail denominated 32s are -18bps tighter after pricing -25bps through our FV in late Jan and the sentiment is helping the non-retail 27s rally in. Sudz is a seasoned operator through cycles – ones that in the past has tested its IG status. Credit seems keen to look past this one.
  • Kering; numbers disappoint by not showing any significant signs of stabilisation. Management says no signs of LFL growth in stores but those with more “newness” are showing more “supportive” trends. It is using that to guide to MSD to HSD LFL growth in stores this year and EBIT to be flat (full here).
  • British American Tobacco comes off an anaemic year and guides for this one to be the same. Add on £6.2b in bulk Canadian litigation settlement and is looking like a lacklustre credit. It is facing market share losses in vapes – a growth segment. Capex spend is not indicative it is in a rush to fix that.

Event driven news

Keep reading...Show less