The Week Ahead: Pall hangs over the high street but Primark is blazing a trail

Click to follow
The Independent Online

Thursday's meeting of the Monetary Policy Committee is unlikely to throw up any surprises, with the cash rate expected to remain firmly anchored at 4.5 per cent. Recent signs of life in the housing market, the BoE's assertion that economic activity is being under-reported, and inflation concerns all mitigate against a rate cut.

However, economist Philip Shaw from Investec believes relief may be close, predicting a half per cent cut during the first half of 2006. "Although the committee's angst over inflation will prevail for a while, we see rates coming down to 4 per cent next year," he said.

This will not be soon enough for the struggling retail sector, with expectations of another weak set of figures from the British Retail Consortium on Tuesday. "Overall, the retail sector may have stabilised, but at a very low level," said John Butler, an economist at HSBC.

One retailer that does not seem to be suffering is the value clothing operation of Associated British Foods (ABF) - Primark. The group may have lost its main warehouse to fire last week, but few analysts believe the event represents more than a minor inconvenience to its booming sales profile.

ABF reports its full-year result this week, with market consensus of around £585m pre-tax - an 11 per cent rise on last year. David Lang, an analyst at Investec, said: "It's going to be a good result, with a brilliant result from Primark." On a like-for-like basis, Primark's UK sales are expected to rise by around 9 per cent. The other key issue is the outlook for the sugar business, a UK duopoly between ABF's British Sugar and Tate & Lyle.

After last month's upbeat trading announcement, investors are also expecting good things from Marks & Spencer's interim result and strategic update. Since mid-September, the retailer's share price has leapt by 26 per cent to a 433p high as investors have begun pricing in the anticipated operational turnaround.

Analysts feel that M&S will need to post a profit of at least £300m to silence the remaining sceptics. JP Morgan predicts management will raise its 2005 cost-cutting targets by 11 per cent to £255m and unveil an accelerated store refurbishment programme. The overhaul is a cornerstone of chief executive Stuart Rose's turnaround plan, as the chain's largely old and tired estate is gradually revamped. However, the City is still keen to see evidence of a long-term sales recovery and margin improvements.

Elsewhere, Robin Saunders should find herself back in the spotlight as the deadline for bids for the pub group Spirit approaches. The former WestLB banker, who set up private equity firm Clearbrook Capital Partners last year, has secured backing from the world's biggest brewer, InBev, for a £3bn offer for the privately owned chain. Other interested parties included the property tycoon Robert Tchenguiz, Punch Taverns (which has final numbers out this week) and the Australian bank Macquarie.

Brewer SABMiller reports its interim profit this week, with slowing US sales likely to be offset by good emerging markets growth. David Hallam, an analyst at Williams de Broë, is upbeat about the prospects of the group's newly acquired South American brewer, Bavaria, believing its emerging markets bias will allow SABMiller to grow at a faster rate than its peers.

BT and Cable & Wireless face the market this week, with both firms posting their interim profits. Neither company's result is expected to sparkle, as they are feeling the effects of increasing competition.

The German group E.ON will be under pressure from the City - and possibly its takeover target Scottish Power - to come clean about its intentions when it reports quarterly results. Two months ago management announced it was considering a possible takeover of the Scottish company, which reports first-half figures this week. E.ON, which has remained silent since then, will soon have to "put up" - and make a firm bid - or "shut up" and walk away.

And finally, the National Lottery operator Camelot will tomorrow say that its sales in the first six months of this financial year were up £55m - or 2.3 per cent. This is largely because of the success of Euromillions, the game in which an Irishwoman won £77m earlier this year, and Camelot's interactive games. This is the longest period of growth in the 11 years Camelot has had the National Lottery licence, and is a good base for starting the battle to retain it.

CALENDAR

Tomorrow 7

UK RESULTS: (final) United Clearing; (interim) Immunodiagnostic Systems

Tuesday 8

UK RESULTS: (F) Associated British Foods, Careforce Group, Connaught Group, Ferraris Group, Next Fifteen Communication; (I) Cable & Wireless, Celsis International, Charles Stanley Group, Comino Group, Electrocomponents, Marks & Spencer, Yell Group; (1Q) Dicom Group; (3Q) BG Group, FireOne Group, nCipher

Wednesday 9

UK RESULTS: (F) Fenner; (I)Aveva Group, Firstgroup, I-Mate, Robert Wiseman Dairies, Top Ten Holdings, Volex Group, Wincanton

Thursday 10

UK RESULTS: (F) Punch Taverns; (I) 3i Group, BTG, Dairy Crest Group, Invensys, SABMiller, Young & Co.'s Brewery; (2Q) BT Group, Scottish Power; (3Q) Royal & Sun Alliance

GERMANY RESULTS: (3Q) E.ON

Friday 11

UK RESULTS: (F) IDMoS; (I) Hornby, Whitehead Mann Group

Comments