The Week Ahead: Growth goes out of fashion at Next and French Connection

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The Independent Online

Retailers dominate the reporting week with beleaguered fashion outlets Next and French Connection (FCUK) among several big high-street names due to deliver interim results.

Seymour Pierce analyst Richard Ratner said the lack of a big fashion trend this year would make it tough for Next and FCUK.

"It has been quite difficult because there has been no clear trend in young fashion and it is an overcrowded market," Mr Ratner explained.

He said Next's like-for-like sales growth was likely to be "awful" at around minus 9 per cent and investors would turn their attention to the retailer's outlook for the next 12 months. He added that a key area would be the amount of stock carried by the group. "I don't think they would have had as good a (summer) sale as they would have liked."

Next shares jumped on Friday after rumours surfaced that private equity funds were running the rule over the group. The stock closed 63p higher at 1,728p.

Evolution Securities analyst Nick Bubb said Next's success with its direct-mail catalogue business would help offset its declining market share, but he still expected the group's pre-tax profit to be £164m, down from £173m.

Mr Ratner said he was also expecting a relatively disappointing performance from FCUK, which reports its half-year results on Wednesday.

"The brand is not down and out but there is no sign of a pick-up yet," Mr Ratner added.

Other retailers joining the reporting catwalk include the privately owned department store and supermarket group John Lewis, B&Q owner Kingfisher and chocolate retailer Thorntons, while Primark owner Associated British Foods is set to deliver a trading update tomorrow.

Barclays Stockbrokers analyst David Liston said investors would concentrate on the trading conditions for Primark, a discount fashion business that generates the bulk of AB Foods' profits.

Mr Liston expects Primark's like-for-like sales growth to be flat to marginally positive.

From the catwalk to the runway with aerospace group BAE Systems due to report half-year results on Wednesday.

Deutsche Bank analyst Ben Fidler expects BAE to hand down a first-half-operating profit of £306m, down from £363m.

Mr Fidler added that BAE would be a better performer if it successfully disposed of its 20 per cent stake in Airbus for £1.9bn - a move that its board recently recommended to shareholders.

Also looking for more positive news is power generator Drax, which will report its interim results on Tuesday.

Drax has been in the news for all the wrong reasons in the past few weeks. Hundreds of environmental protesters marched near its Goole power plant in the hope of shutting it down. They say it causes too much pollution.

And Drax also fell out of favour with two stockbroking houses, which dropped their rating of the stock.

Valuation factors also bit in JP Morgan's rating for The Restaurant Group, which will report its half-yearly results on Wednesday. JP Morgan analyst James Ainley said that the company, which operates Frankie & Benny's and Garfunkel's, had been a great turnaround story and was likely to deliver good growth. But he said the current share price had already factored in this growth, resulting in his neutral rating of the stock. Mr Ainley added that he expected The Restaurant Group to deliver a first-half operating profit of £13.5m, up from £12.4m.

Trying to whet investor appetites is financial services group Old Mutual, which will deliver its interim results on Thursday.

Barclays Stockbrokers research associate Roddy Wallace said investors would be particularly interested in the trading performance of the Swedish firm Skandia, which Old Mutual bought in January for £3.6bn.

On the economics front, a barrage of UK data is due this week, including inflation barometer the consumer price index, which will be released on Tuesday, and Thursday's release of a survey from the Royal Institution of Chartered Surveyors, which will provide an insight into house prices. Also released on Thursday are retail sales figures for last month.

CALENDAR

Tomorrow 11

UK RESULTS: (interim) Bovis Homes, Chaucer Holdings, Enterprise, Forth Ports, Group 4 Securicor, Hiscox, Imperial Energy, Lighthouse, NETeller, Oxford Catalysts, Property Recycling, Psion, Star Energy, TT Electronics, UTV, Whatman.

Tuesday 12

UK RESULTS: (final) Allergy Therapeutics, Ascribe, Glisten, Interior Service, Macro 4, Redrow, Surfcontrol, Teesland, Thorntons; (I) Brady, Charter, Chime Communications, Cobham, Computacenter, Drax, Evolutec, Evolution, French Connection, Gyrus, IP, Kiln, Litho Supplies, NSB Retail Systems, Redrow, Sirius Financial Solutions, UKBetting, Vernalis.

Wednesday 13

UK RESULTS: (F) Alumasc; (I) Acambis, Alliance Pharma, BAE Systems, Celoxica, Econergy International, Hikma Pharmaceuticals, Nationwide Accident Repair Services, Next, Omega International, Osmetech, Provident Financial, PuricCore, Restaurant Group, SIG, SMG, Xaar.

Thursday 14

UK RESULTS: (F) Kier, Quayle Munro; (I) 888 Holdings, Aggreko, Ant, Batm Advanced Communications, Cattles, Entelos, Kingfisher, nCipher, NWD Group, Old Mutal, Unite.

Friday 15

UK RESULTS: (I) Interactive Prospect, Stem Cell Sciences.

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