Consumer & Transport: Week in Review

Macro was the mover this week with high-beta earnings coming surprisingly in-line. The sell-off we saw punish some deservingly (VFC, Auchan, ITM, Air-France) and some undeserving (IAG, Coty, Woolworths, Dufry). We've mentioned retail sales prints across US/UK as key event risk next week, but ultimately, we have had a better read on sector trends and the consumer from earnings. Management would have seen most, if not all of July, when they made their comments.

Key Event Risk Ahead

• Tuesday: Betting co Flutter and jewellery brand Pandora both with 1H results.
• Wednesday: HY electronics retailer Ceconomy and its former partner, now wholesale food retailer Metro AG (in IG) - both with Q3 results.
• Thursday: Apparel retailer Tapestry's Q4 results in US pre-market & US July nominal retail sales (control group c +0.1% MoM, prev. +0.9%)
• Friday: UK July real retail sales (ex. fuel c+0.9% MoM, prev. -1.5%)

• VFC posting a slight beat but still facing falling sales and an operating loss. Curve we see as fair here but still see timing as wrong with next quarter looking short of profitability. High beta to macro for those that want to wait in the lines.
• Tapestry's acquisition target, Capri, reports poor results leaving the purchase price from a year ago looking elevated. Tapestry follows with earnings next week.
• Avis management comments indicative to us of a unchanged capital allocation policy. Depreciation costs on fleet expected to stay elevated for the rest of the year.
• PostNL giving as in-line as results can get. It is seasonally skewed to the 4Q so tough for us to take a firm view on the new 31s. Caution till then for longs.
• IAG; a revisit to its very firm 1H results from last week. We liked the 29s through the sell-off – it has tightened aggressively since.
• Molson Coors earnings doesn't leave us being any more sympathetic to new 32s that have been left at wides of brewers.
• Booking.com with firm earnings justifying perhaps its tight levels. Peers generally positive on booking trends.

Event Driven Movers

• Kellanova is facing potential acquisition from Mars according to Reuters reports. Equities +18% on it this week and continues a string of consumer M&A action.
• DSV seems to be edging closer to winning a reportedly €15b bid for DB Schenker. Caution for those on the side-lines to wait out potential (large) supply.
• L'Oreal takes a 10% stake in publicly listed Galderma without disclosing size but based on market cap we see it at €1.7b. Not pushing for board representation so unclear what its plans are. Firm results from the co last month.

Primary

• Coca-Cola, KO (A1/A+) €500m 8Y at MS+88, €500m 29Y MS+148
  • 10bp NIC on 13Y & 30bp on the 29Y. Books were firm with 5.8x cover, long-end always tough to FV.
• Walgreen Boots (B1/BB Neg) $750m 5NC2 at 8.125% (OAS+410), 90-100bp NIC.
• We were surprised co did not pay-down the debt. Regardless £25s and €26s will see some relief on debt getting removed and an ability to (expensively) refi in $ markets.

Rating Actions

• Elo/Auchan: S&P comments on the property arm, again generally in a pessimistic tone.
• Deutsche Bahn: S&P with confusing standalone downgrade but leaving the uplifted rating unchanged and now on positive outlook. Seems to be on increasing support from government. Perps junked by S&P, Moody's still on IG.
• Gatwick: S&P upgrades it to BBB+ stable after the co demonstrated prudent financial policy through covid.
• Samsonite: S&P moving to BB+ Stable. We flagged value on the single 26s during the sell-off. We hope it refinances the line, it's running firmer fundamentals than many of our IG retailers.