The Week Ahead: Retail gloom escalates but can Dixons rise from the depths?

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The Independent Online

Mid-June usually means one thing: the sound of tennis rackets hitting tennis balls. While the start of Wimbledon tomorrow may temporarily divert the gaze of the City, attention will quickly return to the market, where a number of important companies will be in the news.

Mid-June usually means one thing: the sound of tennis rackets hitting tennis balls. While the start of Wimbledon tomorrow may temporarily divert the gaze of the City, attention will quickly return to the market, where a number of important companies will be in the news.

Retailers have made the wrong headlines recently due to poor sales on the high street, and Dixons is expected to add to the gloom on Wednesday. Its chief executive, John Clare, warned in a trading update last month that conditions could get worse. Full-year profits are expected to be flat but attention now will be on any comments Mr Clare makes about the outlook for the rest of the year.

Nervous analysts are ready to seize on any good news. They are concerned that Dixons' share price is mainly being supported by its high dividend payouts and share-buyback programme. They are also worried that other retailers, particularly Tesco, are continuing to encroach on Dixons' territory by selling products such as iPods.

And while Dixons has plans to continue expanding overseas - it recently announced a £1bn option to buy Russia's largest retailer within the next six years - more than two-thirds of its operating profit is in the UK.

There are also hopes that Mr Clare will explain how Dixons, which owns The Link, PC World and Currys, can carve costs out of its supply chain.

There could be brighter news at supermarket group J Sainsbury, however, when it releases first-quarter figures. "Sainsbury's is up against some fairly easy comparatives, and the disarray at Morrisons will have played into its hands. So it would be surprising if it's not showing growth," says Paul Smiddy, retail analyst at broker Robert W Baird, who is predicting like-for-like sales growth of 2.5 per cent. The chain is part way through a recovery strategy laid out by chief executive Justin King, and the City will want to hear that this remains firmly on track.

Tesco will also provide an update on trading, while at the smaller end of the market, tour operator MyTravel, which narrowly avoided bankruptcy last year, releases interim results.

These will be the first since MyTravel completed a massive £800m debt-for-equity swap in December, and it is hoped that the company will benefit from solid trading conditions after bullish statements from fellow operator First Choice recently. MyTravel said in March that summer bookings had been encouraging and it was on track to meet annual targets. As part of its restructuring, it has reduced capacity in the UK and increased its focus on margins and cost control.

The City will also be watching Crest Nicholson, which is reporting interim results. Last month, property developer Gerald Ronson walked away from a takeover offer for the housebuilder after the company refused to open its books to Ronson's Heron International. Investors will be awaiting with interest Crest's reasons why the £480m offer was too low. Heron still retains a 23.4 per cent stake in Crest but, in accordance with market rules, cannot launch another bid for six months.

Property developer Berkeley is also publishing results. Last year, chief executive Tony Pidgley announced plans to return £1.45bn to shareholders over a six-year period, and investors will be looking for any news on attempts to sell the Northern homes business Crosby. Last week it revealed it had received approaches, including one from Australian company Lend Lease.

Elsewhere, and bus and rail operator Stagecoach releases full-year results. Its most recent trading update confirmed it would beat market forecasts, largely due to the strong performance of its rail division. Stagecoach has a 49 per cent stake in Virgin Trains but faces uncertainty over its South West Trains franchise, which expires in February 2007. The group wants an extension but chief executive Brian Souter has expressed concerns that its case may have been harmed because the franchise is making too much money.

Another company to keep an eye on is GW Pharmaceuticals, which develops drug treatments based on cannabis. Its shares were hammered after regulators ordered further tests of its multiple sclerosis drug Sativex.

In other news, market attention will focus on the Monetary Policy Committee's minutes for June. The Bank of England team decided to leave interest rates on hold, but its latest deliberations will be scrutinised for any signs that the MPC is leaning towards trimming the cost of borrowing.

And on Wall Street, Morgan Stanley releases second-quarter results. The investment bank warned last week that earnings would be 15 to 20 per cent lower than last year - news that coincided with the departure of its chief executive and chairman, Philip Purcell.

CALENDAR

Tomorrow 20

UK: Results: (final) UBC Media; (interim) GW Pharmaceuticals.

Tuesday 21

UK: Results: (F) WS Atkins, Cybit Holding, Halma, iSOFT Group, James Cropper, Photo-Me International, Tribal Group, XKO Group.

Wednesday 22

UK: Results: (F) BBI Holdings, Britannia Finance Holdings, Center Parcs UK, ContentFilm; (Q1) OXL Ricardo.

US: Results: (Q2) Harley-Davidson; (third quarter) Apple.

Thursday 23

UK: Results: (F) Computerland UK, Dyson Group, E2V Technologies, New Avesco, Victoria; (I) Crest Nicholson, Media Square, MyTravel, OMG; (first quarter) Bede.

Friday 24

UK: Results: (F) Berkeley Group Holdings, James Latham.

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