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Business Analysis & Features

The Week Ahead: Tesco and M&S are expected to confirm more cracks in their foundations


Shareholders in Caledonia Investments will be looking for signs that the group can make it 47 years of successive annual dividend pay-outs in its third-quarter results today.

Caledonia has been one of the stock market’s safest bets during a financial crisis and economic downturn that has lasted longer than the Second World War, with the dividend pay-out per share soaring more than 50 per cent from 21.6p a share in 2007 to 34.3p last year.

A swathe of red blocks signalling 20 per cent off bedding, curtains, lights and furniture currently dominates the front page of the Dunelm website. Investors will be hoping for very little red in the blinds-to-mirror retailer’s trading statement tomorrow, though, particularly after Dunelm failed to pay thousands of staff last week due to “administrative error”.

Numis analyst Chris Millington expects residential developer Persimmon to confirm strong trading for the end of 2013 on Wednesday, with some house price inflation also helping the figures. However, he still thinks that the stock is “expensive relative to peers”, with shares valued at well over £12 a pop.

All eyes will be on Marks & Spencer and Tesco on Thursday, as the great empires of the high street and supermarkets are expected to confirm yet more cracks in what investors had long believed were indestructible foundations.

Marks ’n’ Sparks is forecast, at best, flat sales in clothing, footwear, and homewares on a like-for-like basis – industry jargon for stores open more than a year and that are therefore easily comparable. 

Numis scribbler Andrew Wade says that M&S shares “look inexpensive from a cash flow perspective but, on the back of nine previous quarters of negative like-for-like sales, we remain unconvinced by the crucial piece of the jigsaw – the improvement in trading trend in the general merchandise division”. 

Tesco’s chief executive, Philip Clarke, is expected to remain in the long shadow of his predecessor, Sir Terry Leahy, with a poor six weeks of sales to 4 January.

Talking of Tesco, the meat packer Hilton Food Group issues a trading report on Friday. Last month, Hilton announced a new agreement as a supplier to Tesco that runs to February 2019 and analysts upped their forecasts.