Investors turn to drink and retail therapy

Stock Market Week

AFTER the volatile ride of the past few sessions, investors have got every right to turn to shopping and drinking.

Punters have been left flustered and confused by the recent gyrations in the FTSE 100 - lower before the US rate decision, sharply higher afterwards - and will be keen to drown their doubts in beer and expensive goods.

This week results schedule will be just the thing, with the pubs giant Scottish & Newcastle and three retailers - Dixons, Budgens and MFI - set to unveil figures. The Bank of England interest rate decision will add some extra spice, even though most economists expect no change in monetary policy.

S&N will pour its finals on to the market tomorrow. The brewer of John Smith's and Fosters is the first blue-chip to unveil figures for some time and the results meeting should be a lively affair.

S&N's year has been as bitter as one of its best ales. The group's pub business - the UK's fourth largest - has had a rotten first half as wet summer weather and the gloomy economic outlook kept the patrons away from the bar. The improving economic fortunes should have made for a better second half, although some analysts doubt whether S&N's Rat & Parrot and community pubs have attracted enough beer-swilling crowds to offset the earlier shortfall.

On the brewing side, profits have suffered a pounds 25m setback due to changes to a supply contract with the Grand Pub Company, own- ed by the Japanese bank, Nomura.

The external woes have laid bare S&N's high cost base, forcing the company to restructure in an effort to bring costs below the creeping deflation in beer selling prices.

This combination of bearish factors prompted the company to encourage analysts to cut their forecasts throughout the year.

Experts started off with predictions of a rise in pretax profits to pounds 440m and ended up by forecasting a fall to around pounds 406m from last year's pounds 423m.

However, some analysts such as Nigel Popham at broker Teather & Greenwood, believe that the worst is over and it is time to order a round of S&N shares.

With an improving economy and the brewing problems solved, the stock could rebound from its recent underperformance.

Any recovery could be speeded up by corporate action. While rivals Whitbread, Bass and Punch Taverns got involved in a bar brawl over Allied Domecq's pubs, S&N has been absent from the sector consolidation.

The company has room to buy some more pubs without falling foul of the regulator and many experts think that an acquisition of a smaller group, such as Greenalls, is only a matter of time.

The other talking point is the much-rumoured disposal of S&N's Centre Parcs holiday business. The division, which owns Pontins in the UK and tourist parks all over Europe, has undergone a major re-styling to get rid of its staid image and entice a younger crowd. However, results have been disappointing and a sale to a European tour operator is still on the agenda.

Dixons is the other big hitter due to unveil figures. The shares in the electrical retailer have had an amazing run, rising 225 per cent in 12 months, but the core business of peddling computers and cameras has nothing to do with it. The stock's soaraway growth has been fuelled by Freeserve, the loss-making free Internet service. Dixons is planning to float some 18 per cent of Freeserve and with the pricing of the issue less than a week away, chairman Sir Stanley Kalms and chief executive John Clare will have a hard time trying to talk PCs and CD players.

When the Freeserve hysteria dies down, they will unveil pretax profits of around pounds 230m, up from pounds 218m last year, according to the estimates service IBES.

The Dixons, Currys and PC World stores had a tough first half as recession- scared customers avoided buying expensive items. However, the chains should have recovered in the second part of the year as buoyant consumer confidence and new technological gizmos such as digital television and videodiscs pushed sales higher.

Investors will want to know whether Dixons is planning a major share buyback. The company's cash pile of around pounds 300m will be boosted by the Freeserve flotation proceeds and many experts are betting on a substantial cashback in the near future.

MFI Furniture would kill to have a Freeserve-type service to boost its ailing share price.

The flat-pack specialist, whose stock has underperformed the market by over 50 per cent, will unveil horrible results. Analysts' predictions range from a loss of pounds 30m to a profit of pounds 20m as experts cannot agree on the extent of the exceptional items in MFI's balance sheet. IBES puts the consensus at a profit of pounds 4m, a huge slump from last year's pounds 60m.

Sales are unlikely to have recovered from a crisis in the furniture market in the first part of the year. However, new chief executive John Hancock's plans to slash the number of products on offer should have had a positive impact and the current trading statement could be less gloomy than expected.

Comments on the rumoured interest from Wal-Mart, the US retail giant, will be carefully scrutinised.

Budgens' figures will be more upbeat. Analysts are going for pounds 12.7m, up from pounds 10.4m, on the back of a solid sales performance. All the eyes will be on the home shopping service, due to be launched soon, and the progress of b2, the former Seven Eleven convenience chain.

Budgens' acquisitions intentions following the collapse of talks with cash-and-carry struggler Booker will also trigger some interest.