The Week Ahead: M&S investors expect some Christmas cheer

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Marks & Spencer looks set to be confirmed tomorrow as one of the biggest winners in the retail sector from Christmas 2005. City investors are certainly hoping for such an outcome as M&S shares have soared by more than one-quarter since October, easily outperforming peers.

So what can shareholders expect from tomorrow's trading statement? Stuart Rose is firmly focused on the retailer's profit line, so little is likely in the way of like-for-like sales growth over the past quarter. In October's second-quarter update M&S delivered a 1.3 per cent rise in like-for-like sales and analysts are expecting only a slight improvement on this figure this time around.

The group's previous update to the City propelled its stock through the 400p level that Philip Green offered for control of the company and then past 500p (last month) for the first time in seven years. This performance prompted Brandes Investment Partners, the US fund manager which is M&S's biggest shareholder, to cut its stake from 15.3 per cent to 13.3 per cent. One can't blame the fund for locking in profits. It was among the few who piled into M&S when its shares languished below 200p back in 2001.

Given the strong momentum at the retailer, Dresdner Kleinwort Wasserstein forecasts it to register profits of £715m at the full-year stage, rising to £830m by the end of 2007.

TODAY: Results: None expected.

TOMORROW: There has been some worry in recent months about the increasingly difficult trading conditions faced by the van hire specialist Northgate. Strong competition, particularly from one player in Scotland and the North of England, has taken its toll on the group, as has some weakness in the construction and retail sector the company services.

Northgate sees peak demand in November and December so its interim results will be watched especially closely. As it stands, analysts hope to see the company achieve profits of £53m at the full-year stage, up from £45m last time.

Results: Full year - Cobra Biomanufacturing. Interims - Northgate; Inter Link Foods. Trading statements: Marks & Spencer; Topps Tiles.

WEDNESDAY: Both HSBC Securities and Merrill Lynch were last week heard making positive sounds about the luxury goods retailer Burberry before its third-quarter trading statement. HSBC expects a solid increase in sales from the group, driven by a strong contribution from store openings and the launch of the Burberry London perfume. As for Merrill, it forecast the retailer to deliver a 9 per cent rise in sales during the quarter, and tipped the company to be a top performer over the coming years. It predicts Burberry will notch up a 40 per cent rise in earnings over the 2005 to 2008 period, leaving it with a growth rate of more than twice the sector average.

Dresdner Kleinwort Wasserstein worries that the strong bounce enjoyed by William Morrison shares at the tail-end of last year is likely to be short-lived. While the supermarket group's forthcoming statement will probably reassure investors, the broker believes that pressure on profits margins, stemming from Morrison's labour-intensive retail model and cost problems at Safeway, will frustrate hopes for a rapid rebuild in profitability. The group's Christmas update will detail its performance for the six weeks ending 8 January. Like-for-like sales over this period are forecast to have been broadly flat.

Results: Full year - Innovata. Interims - Vantis. Trading statements: Burberry; Matalan; William Morrison Supermarkets.

THURSDAY: HMV reports its Christmas trading figures and interim results. In September, the music and DVD retailer disappointed the market. Since then, competition has intensified. It is therefore no surprise that HMV shares were a poor performer towards the end of 2005.

Analysts expect the group to slump to a loss of £4m for the first half of its financial year, compared with profits of £10m last time around. For the first 11 weeks of the retailer's second half, Dresdner Kleinwort Wasserstein forecasts a like-for-like sales decline of 4 per cent at the HMV chain and 3.5 per cent at the Waterstone's bookselling business.

The key question at Boots is how the healthcare retailer has performed against last year's successful Christmas campaign. Few analysts predict that Boots will set the City alight with its update, which will cover the third-quarter sales period to the end of December. Most expect the group's presentation to reveal a retreat in like-for-like sales.

Results: Full year - Parkdean Holidays. Interims - Photo-Me; HMV. Trading statements - Boots; Greggs; GUS; House of Fraser; Sainsbury's; Signet.

FRIDAY: Results: Full year - None. Interims - Broker Network.