EM LATAM CREDIT: Mexico's Retailer Liverpool (LIVEPL; NR/BBB/BBB+) 1Q Earnings
“Liverpool 1Q Net Income Misses Estimates” – BBG
Neutral for spreads
• Mexico retailer Liverpool posted strong revenue and same store sales growth YoY but disappointing EBITDA and bottom-line results. Bonds look interesting based on relative value.
• Revenues rose 10% YoY driven by growth in its Liverpool division with same store sales increasing 7.9% but weighed down by a 13% increase in the cost of goods sold and an 11% increase in operating expenses, which the company blamed on the hike in the country’s minimum wage.
• EBITDA margin compressed 230 bps to 12% leading to a net income drop of 20%. The company reported a net debt leverage of .2x which was an increase from -.04% QoQ.
• The Mexican economy has been slowing this past quarter with economic activity YoY reported -.02 in January and -1.05% in February according to Bloomberg. Earlier this week the IMF slashed its estimate for 2025 GDP to -.3% from their January estimate of 1.4%. Please see our post on the IMF revised forecast for more information:
https://mni.marketnews.com/42wcwOp
• The company’s January 2025 issuance of 12-year notes which were priced at T+205bps was last quoted T+235bps, 11 bps wider MTD. The Mexico sovereign (MEX; Baa2neg /BBB /BBB-) 12-year notes were last quoted T+246bps, 12 bps wider MTD.
• Liverpool is participating in the buyout of U.S. retailer Nordstrom that is being taken private, and that deal is expected to close the week of May 18, 2025, according to company filings.
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UK FISCAL: Remit expectations ahead of the Spring Statement (2/2)
- Medium-dated issuance is expected to see a larger increase, with the median estimate at GBP97bln. This would represent 32.4 % of issuance (30.9% last March, 31.3% outturn when including the upsized syndications). We would once again expect two 10-year syndications in the fiscal year.
- Long-dated issuance is expected to fall back by most with median estimates at GBP51bln which makes up 16.4% of total issuance (down from the 18.5% target a year ago and 20.7% outturn). This bucket has the potential to be upsized through syndications fairly substantially, however. We would pencil in at least 3, potentially 4 long-dated syndications, but see little issuance longer than 30-years.
- Linker issuance is also expected to reduce, to a median of GBO30.5bln (10.0% of total). This would be down from the originally planned 10.9% (11.5% outturn).
- A number of analysts are also arguing for a larger-than-usual unallocated bucket. Estimates here range from GBP10.5bln through to GBP28.0bln with the median expectation at GBP16.6bln. This would be considerably higher than the GBP10bln seen in the 2024/25 fiscal year.
- T-bill estimates range from an unchanged stock to the end 2024/25 level to a GBP11bln increase, with the median at GBP5bln. NS&I funding is expected to remain broadly consistent with 2024/25’s GBP9.5bln level.
UK FISCAL: Remit expectations ahead of the Spring Statement (1/2)
- From the 12 sellside Spring Statement previews that we have read, expectations for the gilt remit range from GBP292bln through to GBP321bln, with a median expectation of GBP303bln (which we estimate is not far off where 2024/25 will end up due to the overfunding from the large syndications towards the end of the current fiscal year).
- See the table below for full estimates.
- Short issuance is expected to be larger than in the current fiscal year. Short issuance exceeded the Autumn Budget forecast, largely due to the tenders for the 0.125% Jan-26 gilt (which will mature in the upcoming fiscal year and hence has added to the funding needs for2025/26). Only the lowest estimates expect short issuance at similar to the current fiscal year (around GBP100bln) with estimates ranging up to GBP120bln. The median estimate equates to 36.1% of total issuance – which isn’t that far from the initial 35.9% seen last March. But we note that against expectations, the DMO reduced the proportion of short issuance intended at the time of the Autumn Budget to 34.6% (although as we note with the tenders we estimate the outturn around 36.5%). With the DMO being flexible with tenders (and including the short-end of the curve for potential tenders) at least some of the unallocated bucket could be used for tenders.
OUTLOOK: Price Signal Summary - WTI Corrective Bull Cycle Remains In Play
- On the commodity front, a clear uptrend in Gold remains intact and the yellow metal is holding on to the bulk of its recent gains. Last Thursday’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a 2.618 projection of the Nov 14 - Dec 12 - 19 price swing. Note that moving average studies remain in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2970.1, the 20-day EMA.
- In the oil space, despite recent gains, a bearish trend condition in WTI futures remains intact. However, a key pivot resistance at $69.12, the 50-day EMA, has been pierced and the contract is holding on to its recent highs. A clear breach of this hurdle would strengthen a bullish theme and open $70.98, the Feb 25 high. For bears, a reversal lower would expose the bear trigger at $64.85, the Mar 5 low. Clearance of this level would resume the downtrend and open $63.73 next, the Oct 10 ‘24 low.
