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Pernod Ricard lifts FY'19 outlook; Japan Tobacco FY'18 profit beats estimates

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IFRS 9 Impairment How It Impacts Your Corporation And How We Can Help


Pernod Ricard lifts FY'19 outlook; Japan Tobacco FY'18 profit beats estimates

TOP NEWS

* French wines and spirits maker Pernod Ricard SA raised its earnings forecast for fiscal 2019 despite reporting an 11% drop in net profit in its fiscal first half. For the six-month period ended Dec. 31, 2018, it posted €1.02 billion in net profit, down from €1.15 billion in the year-ago period. The decline was driven by lapping positive non-recurring items in the first half of fiscal 2018, including the deferred tax as a result of the U.S. tax reform. Diluted EPS for the six-month period came in at €4.16, up from €3.74 and higher than the S&P Global Market Intelligence GAAP EPS estimate of €4.04. Pernod Ricard, which is facing pressure from activist investor Elliott Management Corp. to improve its performance, now expects profit from recurring operations in fiscal 2019 to grow between 6% and 8% on an organic basis compared to its prior guidance range of 5% to 7%.

* Japan Tobacco Inc. posted fiscal 2018 profit that beat analysts' expectations despite experiencing "a challenging business environment" during the year. For the year ended Dec. 31, 2018, Japan Tobacco reported that basic EPS came in at ¥215.31, down from ¥219.10 in 2017 but surpassing the S&P Global Market Intelligence consensus normalized EPS estimate of ¥210.75. Revenue increased 3.6% year over year to ¥2.216 trillion, driven by pricing benefits and volume contribution from its international tobacco business acquisitions. The company expects its total tobacco business to deliver mid to high single-digit profit growth for fiscal 2019 on a constant currency basis, after the turnaround of its domestic tobacco unit.

FOOD RETAIL & DISTRIBUTION

* Swedish grocery retailer ICA Gruppen AB (publ) said its EBITDA for nine months ended Dec. 31, 2018 came in at 6.30 billion Swedish kronor, down from 6.76 billion kronor in the previous-year period. The net sales for the nine-month period rose 5.4% to 115.35 billion kronor from 109.41 billion kronor in the 2017 nine-month period. This was a result of a 5.1% increase in net sales of the fourth quarter to 30.07 billion kronor, compared with 28.60 billion kronor in the year-ago quarter. EPS for the nine-month period fell to 18.05 kronor from 20.53 kronor, but in the fourth quarter, rose to 4.61 kronor from 4.41 kronor in the comparable quarter year ago.

* Costco Wholesale Corp.'s net sales in January increased by 8% to $10.71 billion from $9.92 billion in January 2018. During the month, comparable sales across the company's global operations edged up 5.2% year over year. E-commerce comparable sales were up 22.1%, while comparable sales in Canada declined 2.9%. In addition, comparable sales climbed 6.5% in other international markets. Meanwhile, Costco's net sales for the first 22 weeks of the fiscal year ending Feb. 3 came in at $63.70 billion, up 9.3% from $58.30 billion a year ago.

* Ohio-based The Kroger Co., in collaboration with online meal-kits provider Home Chef, expanded its retail meal kits to 500 additional Kroger stores across the U.S. The Home Chef meal kits will now be available at over 700 stores and the supermarkets chain operator seeks to expand the meal kits in 2019 and add new products. Also, Home Chef introduced a customizable meal kit feature for online orders to let customers select or change recipe ingredients. Kroger began rolling out Home Chef meal kits at its stores in October 2018, after the U.S. supermarket chain completed its acquisition of the Illinois-based meal-kit delivery company in June 2018.

* Blue Apron Inc. introduced a new line of meal packs called Blue Apron Knick Knacks. The online retailer of pre-packed meals said that the line will give customers flexibility to combine protein and produce of their choice with pre-portioned spices, sauces, grains and dairy ingredients. Walmart Inc.-owned Jet.com Inc. will offer Knick Knacks for same-day or next-day delivery across the New York City area through its Jet City Grocery service.

* Virginia-based Performance Food Group Co. reaffirmed its fiscal 2019 outlook, suggesting a 10% to 16% growth in its adjusted diluted EPS over fiscal 2018 adjusted diluted EPS of $1.54. While it expects a 7% to 10% increase in adjusted EBITDA over the same metric value of $426.7 million in the previous fiscal. Net sales for the first half of fiscal 2019 surged 5.5% to $9.2 billion, while adjusted diluted EPS was 80 cents, a 19.4% increase over the same period a year ago. Also, for the second quarter ended Dec. 29, 2018, net sales grew 7.1% to $4.6 billion and adjusted diluted EPS increased 15.0% to 46 cents, beating S&P Global Market Intelligence estimate for normalized EPS of 40 cents.

* Japanese convenience store operator Lawson Inc. shut two of its franchise convenience stores located in Saitama Prefecture near Tokyo after it found the store had tampered labels on food items to extend expiration times by seven hours over a period of several years, The Japan Times reported. The stores mislabeled boxed meals and baked goods, including pork bowls and sandwiches, by changing labels two hours prior to the expiry, the report said, citing the company. Lawson is investigating other stores in Japan as well, the report added.

PACKAGED FOODS

* Tyson Foods Inc. said it agreed to buy the Thai and European poultry operations of BRF SA for $340 million. Tyson Foods will acquire the Brazilian company's chicken processing facilities, which include four plants in Thailand, one in the Netherlands and another one in the U.K. It was previously reported that Tyson Foods was competing against four other bidders for the assets.

* Food manufacturer Campbell Soup Co. agreed to sell its nutrition unit, Habit, to biotech company Viome Inc. Habit offers an in-home kit that tests users' metabolism, DNA and body metrics in order to personalize diet plans. The company was founded in 2015 and Campbell became its sole investor in 2016. Viome and Habit will develop nutrition plans and other engagement tools to optimize health. Financial terms of the deal were not disclosed.

* Dairy giant Danone's unit Danone Brasil and Dairy Partners Americas Manufacturing Brasil Ltda., which is a joint venture between Nestlé SA and Fonterra Co-op Group Ltd., could be added to Brazil's 'dirty list' due to their engagement in slave labor, Reuters reported, citing labor inspector Renato Bignami, who is coordinating an audit on the companies' supply chains in Sao Paulo. Danone Brasil and DPA have been accused of being complicit with a businessman who trafficked people from poor regions of Ceará and kept 28 people in debt bondage, the report said. The organizations that are added to the list are prohibited from securing credit from state banks or other public financial support, the report added. The companies denied wrongdoing, Reuters said.

* Georgia-based bakery products maker Flowers Foods Inc. said it expects sales for fiscal 2019 to be approximately $4.030 billion to $4.109 billion, a growth of approximately 2% to 4%, and diluted EPS to be approximately $0.94 to $1.02. It reported a 0.8% rise in sales for fiscal 2018 to $3.952 billion and its adjusted diluted EPS came in at 94 cents, marginally up from the S&P Global Market Intelligence consensus mean estimate of 93 cents. Net income for the 52 weeks ended Dec. 29, 2018, increased 4.7% to $157.2 million. President and CEO Allen Shiver said the company expects to roll out products of its recently acquired Canyon Bakehouse LLC in 2019, which is expected to bring in sales of approximately $70 million to $80 million.

* Japanese meat seasonings maker ARIAKE JAPAN Co. Ltd. said it expects fiscal 2019 net sales to increase 4.5% to ¥56.80 billion and basic EPS to be ¥277.42. For nine months ended Dec. 31, 2018, the company reported a 1.4% increase in net sales to ¥41.46 billion from ¥40.90 billion for the nine months ended Dec. 31, 2017. The company's comprehensive income, however, fell 31% to ¥5.76 billion from ¥8.34 billion in the same period year ago. Ariake's basic EPS for the nine-month period was ¥165.16 compared with ¥190.64 for the same period year ago.

* Japanese packaged foods maker Meiji Holdings Co. Ltd. said it expects fiscal 2019 net sales to increase 2% to ¥1.266 trillion and basic EPS to be ¥489.59. For nine months ended Dec. 31, 2018, the company reported a 1.5% increase in net sales to ¥950.70 billion from ¥936.82 billion in the 2017 period. The company's comprehensive income, however, fell 0.8% to ¥63.26 billion from ¥63.79 billion in the same period year ago. Meiji's basic EPS for the nine-month period was ¥426.80 compared with ¥349.30 in the prior-year period.

TOBACCO & SMOKING PRODUCTS

* Aphria Inc.'s board has rejected a hostile takeover attempt by Green Growth Brands Inc., a deal valued at C$2.8 billion. Toronto-based Green Growth in January offered to acquire all the remaining shares of Aphria not already owned for 1.5714 of its common shares. Aphria said its board carefully considered the offer and consulted a committee of its independent directors as well as other financial and legal advisers. The board ultimately unanimously rejected the offer on the grounds that the bid undervalued the company and offered shareholders a substantial discount to its current and future value.

RESTAURANTS

* YUM! Brands Inc. reported 6% sales growth, excluding foreign currency translation, for its fourth quarter ended Dec. 31, 2018, with its subsidiaries Taco Bell Corp.’s sales increasing 9%, while that for KFC Holding Co. rose 7% and Pizza Hut Holdings, LLC’s sales edged up 2%. This quarter sales growth contributed to full-year 2018 increment of 5% in sales growth. However, the quarter’s revenue fell 1% to $15.58 billion from $15.77 billion in the year-ago quarter, while a 3% decrease was posted in the full-year revenue to $56.88 billion from $58.78 billion in the previous year. For the fourth quarter, adjusted diluted EPS of 40 cents missed S&P Global Market Intelligence consensus normalized EPS of 97 cents. The full-year diluted EPS, excluding special items, of $3.17 also missed analysts' estimate of $3.72 per share.

* Chipotle Mexican Grill Inc.'s reported its results for the fourth quarter ended Dec. 31. Chipotle's adjusted EPS for the quarter came in at $1.72, beating the S&P Global Market Intelligence mean consensus estimate for normalized EPS estimate of $1.43. Net income was $32 million, compared to $43.8 million in the year-ago period. The company's revenue increased 10.4% to $1.2 billion from the fourth quarter of 2017. For the full year 2018, Chipotle recorded $176.6 million in net income, compared to $176.3 million in 2017. Adjusted EPS came in at $9.06, higher than the Market Intelligence's estimate of $8.58. Full-year revenue totaled $4.9 billion, up 8.7% year over year. Chipotle said it plans to open 140 to 155 new restaurants in 2019.

* Compass Group PLC updated its guidance for fiscal 2019 after what it described as "an excellent start to the year." The U.K. catering company said it now expects organic growth for the fiscal year ending Sept. 30, 2019, to be slightly above the middle of its 4%-6% range "with modest margin progression." The update came as Compass reported organic revenue growth of 6.9% for its fiscal first quarter, driven by U.K. defense contracts and positive sporting calendar events.

INDUSTRY NEWS

* Farmers in France and Germany are digging up about 8,000 hectares and 2,500-3,000 hectares, respectively, of rapeseed fields due to traces of genetically modified organisms that are banned for cultivation were found in the seeds sold by Bayer Aktiengesellschaft, Reuters reported, citing the company. The French authorities discovered minute quantities of GMO seeds, estimated at less than 0.005% of the volume, in three batches of rapeseed seeds sold under the Dekalb brand, the report said, citing Bayer’s France COO Catherine Lamboley. Bayer acquired Dekalb from Monsanto Co. in 2018. Bayer has issued a recall for the unused product, which is not authorized for cultivation in Europe, and is suggesting a payout of about €20 million to the affected farmers in both countries.

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The day ahead

Early morning futures indicators pointed to a lower opening for the U.S. market.

In Asia, the Hang Seng is closed today, while the Nikkei 225 fell 0.59% to 20,751.28.

In Europe, around midday, the FTSE 100 was down 0.20% to 7,159.03, and the Euronext 100 fell 0.69% to 989.48.

On the macro front

The jobless claims report, the EIA natural gas report, the Fed balance sheet and the money supply report are due out today.

Click here to read about today's financial markets, setting out the factors driving stocks, bonds and currencies around the world ahead of the New York open.

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