CONSUMER CYCLICALS
- Kering gives FY EBIT guidance that implies an over halving in year-on-year 2H profits. We expect S&P downgrade. The co struggling to turn around larger Gucci in this macro environment and it does not bode well for Burberry.
- Edenred numbers were firm but upcoming Italian regulation looks to be having an outsized earnings impact has frightened markets to read-through on other regions. Bonds are coming out of tights, but Pluxee levels remain interesting ahead of its earnings
- Electrolux continues to give weak numbers ex. LATAM. We expect a S&P downgrade
- Carrefour YTD trends continued in the sales update. The read through to Auchan is negative on a still competitive French hypermarket pricing environment
- Phillip Morris reports firm earnings continuing its streak. Investments it made - while peers prioritised equity payouts - is benefiting it now
Event Driven Movers
- Tapestry; Judge rules in favour of FTC catching the market by surprise - pricing was moving towards 60% in equities and 70% in local bonds. A 101 forced call is the likely outcome now across the ~$6.1b in bonds
- McDonald’s causes a E-Coli outbreak across several US states. 49 cases, 10 hospitalisations and 1 tragic death are still contained vs. Chipotle issues and leaves it more in-line with past outbreaks that had smaller impact to companies. Earnings next week is likely to paint a bleak picture on trading conditions this week
- VF Corp equities face a broker cut. It seems to echo what we are seeing in US card data - a lack of a turnaround. Bonds are repeating last quarter moves, selling off aggressively into the print
- Auchan; French paper carries headlines it has found a domestic seller of the Russian business. S&P sees it at ~10% of earnings but unclear in the restricted market what multiple it will get. Bonds rallied on the news
- Air Portugal; Air France the latest of companies rumoured to be lining up for a stake. The mover for credit will be if the government offloads a majority stake – and if so to who. Earnings ahead.
- Alimentation Couche-Tard comments late last week turned less conservative on the debt/equity funding mix – yet it continues to commit to “high” IG rating. The target (7-11) remains defensive attempting to appease investors in its ‘IR Day’ this week.
- JDE Peets stock bounces as it names a new CEO and reaffirms FY guidance. It is the local F&B reject in credit – somewhat unfounded vs. fundamentals.
- IDS does a bolt-on taking a 20% stake in Greece’s largest parcel carrier. We revisit levels ahead of earnings
Primary (fundamentals linked, levels below)
- Priced; Nestle (6 & 12yr), Fressnapf (7NC3), Picard (4.7NC0.7 floater tap)
- Mandates: DSV (2,4,6,8,10yr; M&A supply), Boparan (£5NC2), Takko Fashion (5.5NC2)
Rating Actions
- Victoria (Secured; B3 Neg/B Neg/BB); Moody’s downgrades to B3 and stays on negative outlook after rough earnings
- Adidas (A3 Neg/ A- Stable); An overdue stabilisation in ratings from S&P
- Agrifarma (B1/B CW Pos): S&P moves to CW positive. It expects it to remain a separate subsidiary to Fressnapf but is accessing level of support latter may provide in the absence of cross-default and guarantees.
- Picard (B2/B neg/BB-); S&P moves to neg outlook as the co does a €200m tap of the floater to buyout current majority owner (Lion Capital). It sees the change of owner as positive to BS governance.
593 words