The Week Ahead: City fears Britain's mean high streets

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The City will be keeping a close eye on retailers next week as a flock of shopkeepers report on how they fared over the Christmas period. Investors have been nervous about the outlook for consumer spending after a rise in interest rates and a slowdown in the housing market. The trading statements may give an indication of how confidence is holding up on the High Street.

The City will be keeping a close eye on retailers next week as a flock of shopkeepers report on how they fared over the Christmas period. Investors have been nervous about the outlook for consumer spending after a rise in interest rates and a slowdown in the housing market. The trading statements may give an indication of how confidence is holding up on the High Street.

Marks & Spencer is likely to show only modest progress, when it releases its update on Wednesday. The nation's favourite store for sandwiches and underwear, is expected to deliver good growth in food, but don't be surprised if the clothing business continues to struggle. The company is up against some strong sales figures from last year and anecdotal evidence of price discounts in womenswear suggests that profit margins are under pressure.

Tesco is expected to be one of the winners over Christmas, despite the company's caution about a slowdown. Sales are likely to be boosted by growth in non-food products as well as progress in its overseas operations. A research note from Goldman Sachs said, "We believe the international sales could still be growing at 30 per cent".

Sales growth is likely to prove elusive at J Sainsbury, which reports tomorrow. The supermarket operator continues to fall behind the industry pace-setters, Tesco, Asda and Wm Morison, and investors will want reassurance that the situation isn't getting any worse. Justin King, the former head of food at Marks & Spencer, has been appointed as chief executive to revive the fortunes of the ailing grocer, but he won't be starting until March.

Boots is expected to make little headway, after warning in November that profit margins would suffer as a result of price discounts and higher investment in its stores. But the market will be more interested in new chief executive Richard Baker's plans to modernise the business.

GUS, which owns Argos and Homebase, is likely to be trading well in the UK, but watch out for profit downgrades from Experian, the credit checking business. Most of its sales come from the US and the weak dollar will be unhelpful for Sterling profits.

Burberry, where GUS retains a 66 per cent holding, is expected to be upbeat as the business expands with new stores around the world. But the raincoats-to-baseball-caps group may also take a hit from dollar weakness, the US being its best-performing region.

Dixons, Europe's biggest electrical retailer, is expected show flat sales in the UK and a slight improvement on the Continent, but investors' attention will focus on the outlook for 2004.

New Look, the "cheap and cheerful" clothing chain, is likely to report a tough trading environment, but the market will be more interested in the company's future ownership. Tom Singh, the founder who retains a 28 per cent stake, made a bid worth 348p a share in October, but the board has yet to decide whether to accept the £699m offer.

Matalan, the discount retailer, is expected to announce poor sales figures after it unveiled a profit warning last month. Investors need to be convinced that management can turn things around.

Carphone Warehouse is likely to have enjoyed a buoyant Christmas with sales of mobile phones boosted by cheaper tariffs and greater handset subsidies. The market will be watching the progress of talktalk, its fixed-line service, which competes with BT.

Outside retail, Reuters, the financial information company, provides guidance on the outlook for the first quarter. After a strong rally in financial markets, investors will be looking for signs that demand for its products is picking up.

SAB Miller, the international brewer, is expected to show solid progress with growth in Europe, Asia and Africa. But the market will be wondering if there is any improvement in the struggling US business.

Granada and Carlton hold their EGMs on Tuesday to approve their £5.3bn merger. The creation of a single ITV is expected to go through, but questions will be asked about the proposed incentive schemes. Pirc, the investor activist group, is concerned that the remuneration packages are excessive.

Global share prices rallied on hopes of an economic recovery, but some believe optimism is misplaced. Dhaval Joshi of SG Securities said: "We are cautious on developed-world economies, particularly the US. Last year, you saw tax cuts and strong borrowing, and this gave the illusion that everything was hunky-dory. But once the tax cuts are gone, there is nothing left to drive the economy."

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