BUSINESS LIVE: Bank of England interest rate decision looms; Next forecasts £1bn profit; Ocado Retail targets double-digit growth

The US central bank announced a massive half-percentage point interest rate cut last night as it seeks to achieve a “soft landing” for the world’s largest economy.

It was the first rate cut by the US Federal Reserve in four years and sent the dollar tumbling against the pound, which hit a new two-and-a-half-year high of just under $1.33.

John Moore, Senior Investment Manager at RBC Brewin Dolphin:

‘Ocado Retail is starting to deliver results, following a challenging period for the business. Strong revenue, volume and customer growth suggest the combined company strategy is delivering results, and Ocado Retail’s outlook has been upgraded accordingly.

‘For the Ocado Group as a whole, this should represent another step on the path to £3bn in sales, growing EBITDA and self-sustaining growth without having to take on further debt or raise capital. The past nine months have been tough for the business, with the stock down more than 50% year-to-date and almost 75% compared to five years ago. For that to turn around, the business’s growth will need to translate into profitability.’

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Next has been on a positive news streak of late, and today’s results did not disappoint investors. Just six weeks after its last upgrade, Next has published another improved profit forecast, with sales from the first half coming in higher than previously expected.

‘Demand in the online channel continues to grow rapidly. Even though it already accounts for more than half of the group’s sales, the online channel is still seen as the main driver of growth. Expansion abroad is still in its early stages and, if Next manages to execute its strategy well, there is still plenty of room for growth.

‘Retail is a different story, with store revenues down 2.1% in the first half. That trend is not expected to change going forward, with high street shopping in structural decline. Next has some insulation in the fact that its stores typically have shorter and more favourable leases than peers, and are more focused on out-of-town retail outlets that have performed better.

‘Full-price sales continue their upward trajectory. Offering what fashion-loving consumers want at the right price is exactly what is helping to keep Next’s profitability at the top end of its peer group. Overall performance has been good and the current valuation does not fully reflect the growth opportunities available. But expanding overseas is not easy, as many of its peers have found out the hard way, meaning there could be some bumps in store along the way.’

Ocado Retail expects to post double-digit revenue growth this year after sales rose 15.5 percent in its most recent trading quarter, thanks to a focus on value to attract more customers.

The company, a joint venture between Ocado Group and Marks & Spencer, said it now expected annual revenue to rise in the low double digits, up from previous guidance of mid-to-high single digits.

It said its core profit margin would be around 2.5 percent, unchanged from its previous view.

Rolls-Royce’s nuclear energy ambitions received a major boost last night when the company secured a key contract.

The British engineering giant has been selected to build mini nuclear power plants for the Czech government.

Rolls-Royce has beaten off competition from French, American and Japanese rivals to be named preferred supplier to state-owned energy group CEZ.

Fears over the future of British Steel are growing after the Chinese-owned company revealed losses had soared to more than £400m.

In the latest blow to the UK steel industry, the company said losses had increased eightfold in 2022, from £49.5m to £408.4m.

Next expects to make an annual profit of almost £1bn after the high street giant raised its outlook for the second time in two months on the back of better-than-expected recent trading results.

The group, often seen as a useful indicator of how British consumers are faring, reported a 7.1 per cent rise in pre-tax profits for the first half to July and said full-price sales for the first six weeks of its second half had “materially exceeded” its expectations and rose 6.9 per cent.

As a result, Next has updated its second-half sales growth forecast to 3.7 percent, up from previous guidance of 2.5 percent.

It now also expects pre-tax profit for the 2024/25 financial year of £995m, up from its previous forecast of £980m and up 8.4 per cent from 2023/24.