The Week Ahead: Tesco smells more success as Imperial sniffs smoke-free air

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The Independent Online

It is a busy time for corporate announcements this week, with a range of companies and sectors updating the market. Only one giant, however, will be dominating the headlines.

It is a busy time for corporate announcements this week, with a range of companies and sectors updating the market. Only one giant, however, will be dominating the headlines.

Supermarket behemoth Tesco is likely to continue not putting a foot wrong when it produces interims: pre-tax profits are expected to come in around £780m, against last year's £661m, with underlying sales growth of about 7 per cent.

As Williams de Broë analyst Tom Gadsby wryly notes: "Amid the carnage that is the UK food retail sector, the good ship Tesco sails serenely on."

J Sainsbury and Wm Morrison, two rivals enjoying a less than sterling performance of late, and both due to update the market next month, will be watching nervously - particularly as Tesco has not even started its traditional hard-sell Christmas campaign yet.

Most expect underlying sales growth to ease in the future, largely because of more subdued consumer spending patterns. But overall, the tone from Tesco boss Sir Terry Leahy is likely to be upbeat.

Meanwhile, in the US, one of the largest legal cases in history gets underway. The Department of Justice is suing British American Tobacco, Marlboro owner Altria and RJ Reynolds, for $280bn (£156bn) in profits earned since 1971. It claims the industry misled the public over the health risks of smoking and marketed cigarettes to children. If it wins, it would cripple the industry; the sector, however, remains confident it will win out.

Elsewhere, and lots of trading updates will be released. The update from Imperial Tobacco will focus on two non-trading issues: tax in the German market and smoking in pubs at home.

Germany has upped tobacco tax, and rivals have already talked of tougher trading. Imperial, however, has one of the biggest exposures to the country through owning domestic manufacturer Reemtsma.

The debate on smoking in public places is expected to rumble on for some time yet. Understandably, the industry is opposed, but the Government continues to make noises apparently in favour.

Enterprise Inns, which owns more than 5,200 pubs, is also likely to mention the debate; most pub companies, fearful for their trade, are also opposed. Enterprise is, however, making concessions and was recently reported as agreeing to ban smoking in around 80 per cent of its trading space by 2009.

Pub companies have also been under the spotlight due to an Office of Fair Trading investigation into tenant relationships. However, the threat of a full inquiry is now fading after the OFT said such agreements presented no competition issues. As to the actual trading, most analysts are expecting Enterprise to show how poor summer weather and cost increases have slowed growth across the estate.

Rounding off the British fags and booze theme will be SABMiller. The London-listed brewer is talking to a former director of Canadian rival Molson about a possible joint bid.

The unpredictable weather across Europe is also likely to have affected trading at SABMiller, and investors will want to hear any news on Molson and a recent acquisition in China.

Overseas, and alcohol remains on the menu with first-half results from French group Pernod Ricard, the owner of Havana Club rum, Chivas whisky and Jacob's Creek wine. Most are expecting strong numbers - the weather, it would appear, has less effect on our consumption of spirits and wine.

Also worth keeping an eye out for in mainland Europe is Inditex. The Spanish retailer is usually an investor favourite, with generally a strong reputation for growth. It is unlikely to have escaped totally unscathed from the bumpy time on the British high street, however, as the group owns the womenswear chain Zara.

Further afield, and the corporate calendar in the US, which has been notably quiet during the summer months, gently starts winding up once more. Results are due for some key players in the investment banking sector, such as Goldman Sachs, Morgan Stanley and Nike.

The Federal Reserve will also be piping up when it announces its latest decision on interest rates. Earlier this month, Fed chairman Alan Greenspan suggested that the economy was once again gaining momentum.

The market has taken that as a sure sign the cost of borrowing will be hiked once again, this time by a quarter point to 1.75 per cent.

CALENDAR

Tomorrow 12

UK: Results: (final) Ricardo; (interim) 3DM Worldwide, Ashtenne, Burren Energy, Chaucer, Cyprotex, Independent Media Support, Torex Retail, WILink, CI Medical.

Tuesday 21

UK: Results: (I) 4imprint, Acambis, Alea, Bloomsbury Publishing, Concurrent Technologies, Fitzhardinge, Gyrus, Highland Gold Mining, JKX Oil & Gas, Medical Solutions, Metalrax, Tesco, Thomson Intermedia.

Wednesday 22

UK: Results: (F) Barratt Developments, Smiths, Tenon; (I) Alkane Energy, Bede, BioFocus, Coutts, Goshawk Insurance, Henry Boot, Peter Hambro Mining, Robotic Technology Systems, Solitaire, Spring, Wellington.

Thursday 23

UK: Results:: (F) NXT; (I) Cape, Corin, Durlacher, Hardy Underwriting, Highbury House Communications, Laura Ashley, Ottakar's, ServicePower, Sirius Financial Solutions, Tissue Science Laboratories, UCM.

Friday 24

UK: Results: (F) Avanti Capital.

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