The Week Ahead: Can M&S spearhead a high-street revival?
Monday 04 October 2010
Hopes are running high ahead of Marks & Spencer's second-quarter trading statement this week, though some in the City are wary of the impact of the post-emergency Budget weakness in consumer confidence.
JP Morgan said recent clothing data from the BRC and the CBI, coupled with what it termed "generally good" M&S-specific industry data, "had led to the conclusion that M&S is probably outperforming peers in terms of trading". Tougher comparatives and signs of slackening consumer confidence could well weigh on the performance, however, with both UBS and Execution Noble anticipating some slowdown in general merchandise trading.
On the plus side, though, the shares are likely to remain on a firm footing. JP Morgan reckons that, "in the absence of a disappointment in trading" this week, sentiment is likely to be driven by hopes for positive news when M&S issues its strategy update in November, paving the way for strength in coming weeks.
Today: results/updates: none.
UBS is anticipating news of a 9.1 per cent rise in year on year trading profits when the supermarket giant Tesco issues half yearly figures tomorrow. Divisionally, the broker expects the UK retail division to grow earnings before interest and tax by around 5 per cent, while Tesco Bank is forecast to reveal flat profits as increased costs in preparation for new product launches are likely to have offset any organic growth in the business.
The post-results analyst meeting promises to feature Phil Clarke, who will replace Sir Terry Leahy as chief executive next year. "He is well known to investors and is highly unlikely to signal any change to the strategic course of the business at this juncture," UBS said.
The printing group St Ives will publish its annual figures tomorrow and Numis expects the company to book "good progress" in the year to July. The second half is likely to have been strong; the broker is forecasting a moderation in the decline in sales, with revenues expected to have been flat over the fourth quarter. Elsewhere, given management's steps to improve the company's operational performance, Numis expects margins to rise to 4.4 per cent from the 2.6 per cent level seen last year. "We believe the management team has significantly improved the financial outlook for the group," the broker said in a preview note issued last week.
Also tomorrow, the veterinary services group CVS is due to issue full year results. Panmure Gordon expects to hear of £8.3m in pre-tax profits, slightly below the £8.4m delivered year, and at the bottom end of market forecasts of between £8.3m to £9.2m. Beyond the headline figures, Panmure said it was hoping to get "some further colour" behind the company's profit warning in June, and on how business had held up in the following months.
Results/updates: St Ives, Northern Foods, CVS and Tesco.
Results/updates: Sportingbet , Marston's, J Sainsbury, Dunelm and Greggs.
The recruitment group Hays is due to issue a trading statement for the three months to the end of September later this week and ahead of the update, Numis is pinning its hopes on evidence of further momentum in the private sector and overseas businesses.
Strength in those parts should help offset the weakness seen in the UK public sector, the broker said, expecting Asia Pacific "to provide the highest growth rate", driven by Australia and New Zealand. "The downside risk continues to lie with the UK public sector," Numis said, noting that public sector net fees were down around 30 per cent in the final quarter of last year.
Numis also weighed in on sector peer Michael Page, which is due to post its third quarter trading statement on Thursday. The broker said that while year on year on comparatives are tougher, it still expected the company to report improving momentum in net fees, adding: "We expect Asia and the US to lead the growth, but also believe the UK will see improvements relative to the second quarter's flat year on year position."
Beyond the recruiters, Thursday will also see the release of a trading statement from Halfords, the retailer which issued a disappointing first quarter trading update back in the summer. UBS has pencilled in a 1.1 per cent decline for first half like-for-like sales, implying second quarter growth of 0.4 per cent.
Though mindful of the possibility of downside risks – UBS highlighted recent reports of disruption in the supply chain – it reckons that Halfords should be able to "offset any top line disappointment with cost savings, £4m of which are expected to be delivered this year as a result of the distribution chain reorganisation".
"We do no expect any change to company guidance for 2011 pre-tax profits in the range of £135-137m," the broker said.
Results/updates: Rank, Halfords, Hays, Michael Page International, Victrex and Marks & Spencer.
Results/updates: none. Other – John Lewis weekly sales data.
Purchasing Managers Index – construction
Purchasing Managers Index – services
NIESR GDP estimates
Bank of England interest-rate decision
Producer Price Index
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