I’m not afraid to say it. I simply lack the courage to buy into Topps Tiles (LSE: TPT) ahead of upcoming financials. In fact, I would implore anyone holding the share to sell out ahead of third-quarter financial scheduled for Wednesday, 3 July.
It doesn’t bother me the FTSE 250 retailer carries a forward P/E multiple in and around the bargain-basement level of 10 times. Nor am I shaken by its market-beating corresponding dividend yields of 5.5%. The sharp downturn in the UK retail sector in 2019, one which has driven Topps Tiles’s share price 20% lower over the past 10 weeks alone, is of far more concern to me right now.
It’s not as if the home improvements giant wasn’t already on the ropes ahead of the further deterioration in the UK retail sector in the spring, one which suggests shops are experiencing the worst conditions for more than 30 years.
Last month, Topps Tiles announced like-for-like sales had slowed even further in the six months to March, to a paltry 0.2% from the 0.6% rise printed in the same period a year earlier. And I fully expect another set of chilly numbers when those third-quarter numbers are unveiled.
I’m also content to shun TalkTalk Telecom Group (LSE: TALK) in the run-up to first-quarter financials being unpacked on Wednesday, 17 July.
It’s full-year results of a month ago certainly gave plenty to worry about, the company just clinging onto the downwardly-revised EBITDA target which it issued as recently as February for the 12 months to March. And this was achieved in large part through regulatory cuts to what it has to pay Openreach for fibre and a commercial discount deal it has with BT’s infrastructure division too.
Intense competition continues to play havoc in spite of TalkTalk’s efforts to grab share by introducing its ‘Fixed Low Price Plans’ for new and existing customers. That aforementioned release showed its customer base rose by just 2,000 in the final three months of fiscal 2019, versus 44,000 in the prior quarter.
TalkTalk trades right now on a forward P/E ratio of 16.2 times, not cheap for a share with such a troubling profits outlook, in my opinion. In fact, this rating really leaves the telecoms titan in danger of a share price correction should its client base indeed continues to collapse in quarter one.
Out of juice
The final share I think should be avoided in July is SSE (LSE: SSE), one which is set to release its own first quarter numbers on Thursday, 18 July.
We all know how the ‘Big Six’ electricity suppliers are losing customers at a jaw-dropping pace, with SSE haemorrhaging more than half a million accounts in the last fiscal year alone. Things are likely to have remained difficult since the period’s end too, reflecting the toughening economic conditions here in the UK.
In fact, as the pressures created by the Brexit saga propels more and more homes into the arms of independent, promotion-led operators, I’m expecting newsflow from the likes of SSE to continue worsening as 2019 progresses, and probably beyond too.
So you can keep its low rating (illustrated by a forward P/E ratio of 9.2 times) and its big 7.4% prospective dividend yield. I’ll be happy to go share shopping elsewhere next month.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.