BUSINESS LIVE: BoE rates of interest determination; Next eyes £1bn revenue

America’s central bank last night announced a jumbo half percentage point interest rate cut as it scrambles to deliver a ‘soft landing’ for the world’s biggest economy.

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

John Moore, senior investment manager at RBC Brewin Dolphin:

‘Ocado Retail is starting to deliver, after a bumpy period for the company. Strong revenue, volume, and customer growth suggest the joint venture’s strategy is yielding results, and Ocado Retail’s guidance has been upped accordingly.

‘For the wider Ocado Group, this should represent another step on the path towards £3 billion in sales, growing EBITDA, and self-sustaining growth without having to borrow more or raise equity. The last nine months have been challenging for the company, with the shares down more than 50% in the year to date and nearly 75% on five years ago. For that to reverse, the company’s growth will need to translate into profitability.’

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Next has been on a hot streak of delivering positive news lately, and today’s results didn’t disappoint investors. Just six weeks after its last upgrade, Next has issued yet another improved profit outlook as sales since the half-year mark landed higher than previously expected.

‘Skyrocketing demand in its online channel remains a running theme. Despite already accounting for more than half of group sales, the online channel is still seen as the main growth driver. Expansion overseas is still in the early stages, and if Next can execute its strategy well, there’s a lot of room left to run.

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

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

Ocado Retail is expecting to post double-digit revenue growth this year after sales soared 15.5 per cent in its most recent trading quarter, thanks to a focus on value attracting mroe customers.

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

It said its core earnings margin would come in around 2.5 per cent, unchanged from its previous view.

Rolls-Royce’s nuclear power ambitions received a major boost last night as the firm secured a key contract.

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

Rolls-Royce beat competition from French, American and Japanese rivals to be named as a preferred supplier to state-owned power group CEZ.

Fears over the future of British Steel are mounting after the Chinese-owned company revealed that losses had spiralled to more than £400million.

In just the latest blow to the UK steel industry, the firm said losses rose eightfold in 2022, from £49.5million to £408.4million.

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

The group, often considered a useful gauge of how British consumers are faring, reported a 7.1 per cent rise in first half to July pretax profit and said full-price sales over the first six weeks of its second half had ‘materially exceeded’ its expectations and were up 6.9 per cent.

As a result, Next upgraded its forecast for second-half sales growth to 3.7 per cent, up from previous guidance of 2.5 per cent.

It also now expects full-year 2024/25 profit before tax of £995million, ahead of previous guidance of £980million and an 8.4 per cent increase on 2023/24.