As Europe Swelters, Companies Prepare to Complain About the Rain

(Bloomberg) -- As much of Europe swelters in a heatwave, companies from grocers to beer makers are set to bemoan the glum weather that preceded it.

Second-quarter results from businesses that rely on sunny conditions at this time of year are likely to reflect a climate that until this week had been mostly disappointing. Citigroup Inc. on Thursday cut its earnings estimates for Carlsberg A/S, saying temperatures across the brewer’s key markets have been 4 degrees lower in the second quarter compared with the same period of 2018. The same day, U.K. pub company Greene King Plc said poor weather affected its business over the last eight weeks.

“Brewers , ice-cream sellers, mall owners and cricket fans are well overdue a dose of summer,” Keith Temperton, a sales trader at Tavira Securities, said by email. The likes of garden centers and home-improvement stores will be celebrating the recent heat, he said.

Not that everyone will be cheering. Comparisons with last summer, which featured not only a prolonged heatwave but also a soccer World Cup and a royal wedding, could be particularly tough for companies such as Fevertree Drinks Plc and makers of salads such as France’s Bonduelle SCA.

An extended period of very hot weather is also likely to keep customers away from shopping areas across Western Europe, said Clement Genelot, an analyst at Bryan Garnier.

Here’s the likeliest winners and losers of Europe’s changeable summer:

Drinks Makers

Carlsberg is likely the most exposed of the major brewers to the cool summer weather that prevailed across most of north west Europe until recently, said Trevor Stirling, an analyst at Sanford C. Bernstein, citing Nielsen data for May. Heineken NV probably saw better trends due to its greater weighting in France, Spain, and Italy, he said.

Summer is the high season for European makers of beer and soft drinks, with the second and third quarters typically accounting for about two-thirds of profit, according to Jefferies International estimates.

Food Makers

Switzerland’s Bell Food Group AG, already suffering from a higher pork price, warned this month about a weather-related “weak” start to the barbecue season.

Not everyone is likely to be complaining. The cool weather in May and early June probably helped sales at chocolate maker Lindt & Spruengli AG, according to Jean-Philippe Bertschy, an analyst at Vontobel Holding AG.

Retailers

“Monsoon” weather in the U.K. cost British supermarkets more than 120 million pounds ($152 million) in lost sales this month, researcher Nielsen said in a June 25 report. Watch out for the impact of that in J Sainsbury Plc’s first-quarter sales update on July 3.

Barbecue food is unlikely to have been at the top of shoppers’ lists in recent weeks, while Sainsbury may also have seen sales at its Argos unit hurt by lower spending on garden furniture and outdoor cooking equipment as the rain lashed down.

By contrast, the bad weather is likely to have helped retailers focusing on indoor furniture, such as DFS Furniture Plc. And the recent change to hotter conditions is likely to help the likes of France’s Fnac Darty SA, whose outlet near the Montparnasse train station in Paris sold out of air conditioners last Friday. Sales of air-cooling devices reached their highest in at least two decades, a company executive told Europe 1 radio on Tuesday.

Amusement Parks

Theme park operators such as Merlin Entertainments Plc may have been hurt by the summer rain and stand to get a boost from an improvement in the weather. That’s unlikely to bother investors after the Legoland and Alton Towers owner recommended a 4.8 billion-pound offer from a private-equity backed consortium.

Travel

Travel companies including TUI AG should have benefited from Europeans trying to escape the bad weather. “People travel less if it’s hot at home and travel more when the weather at home is bad,” Tavira’s Temperton wrote.

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis, Jon Menon

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