The Week Ahead: Comet sales data on downward trajectory

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The Independent Online

Analysts anticipate news of the worst underlying sales performance in more than a decade at the Cometelectricals chain,when the parent company, Kesa, posts its interim results tomorrow. Credit Suisse expects the UK division to register a 13 per cent fall in like-for-like sales for the second quarter, a deterioration from the 9.9 per cent fall for the three months to the end of July.

Comet, which until this year was one of theUK’s best-performing retailers, has been hit by tumbling sales of big-ticket items, such as washing machines and TVs. The leading credit insurer Coface has scaled back the amount of insurance cover for some of Comet’s suppliers to provide goods to the retailer.

Whenit last reported on 10 September, Kesa said it expected Comet to register a first-half loss.

At the group level, many in the City are also predicting a reduction in Kesa’s final dividend. PhilipDorgan, analyst at Panmure Gordon, said that while he certainly expects a cut in the final dividend, he would not be surprised if the group also scales back its interim payout as itmoves to conserve cash.

TODAY: Results/updates:None.

TOMORROW: Deutsche Bank anticipates news of a 62 per cent slide in profits when Carpetright publishes interim results. “Given the frightening economic news [since the end of September], we expect consumers to postpone carpet purchases for another six months, and now expect secondhalf like-for-like sales to be down 10 per cent,” the broker said. However Deutsche recommends that shareholders hold on to the stock since, in its assessment, the company remains the strongest carpet retailer while many competitors are going under.

Also tomorrow, UBS is looking for some commentary on the year ahead when Cadbury posts a trading update.

Besides management’s thoughts on the economic environment, the focus will fall on the company’s expectations of input cost inflation, which they have said they intend to recover with price increases. Previously at around 6-8 per cent, the number may have changed given recent movements in commodity prices and the fall in the pound.

UBSsaid:“We have raised our 2009 earnings per share estimate by 3 per cent to reflect sterling’s further depreciation.

However, with the shares up 10 per cent in the last three weeks, [the forward multiple] looks expensive to us. In our view, the market’s attaching too much weight to the potential three-year margin uplift and not enough weight to the execution risk and cash-consuming nature of the radical reconfiguration of the cost base that is driving it.” The broker reiterated its “sell” rating on the company’s stock in a recent preview note.

Results/updates: Go-Ahead, Drax, Cadbury, Carpetright, Kesa Electricals.

WEDNESDAY: Results/updates: Wood Group, Charter, Serco.

THURSDAY: Carnival, the dual London- New York listed cruise operator, is due to publish fourth-quarter results.

Among the issues to watch out for will be any change to management’s guidance for the year ahead. Collins Stewart reckons that there is a real risk to earnings expectations as industry accounts point to further deterioration in demand since the company warned on profits in October.

“Over the last couple of weeks the travel press have been reporting news of increased cancellations, some extraordinarily ‘deep discounts’ and heavier than normal incentives for agents to sell product. This all points to a weaker demand outlook than was first thought,” the broker said, adding: “The base assumption in the cruise model is that berths will be sold (100 per cent utilisation); yield is flexed to stimulate demand. However, in the current environment, this relationship could fail, with reports that ships are sailing without full occupancy. … A 10 per cent fall in utilisation would reduce earnings by 44 per cent.”

Results/updates: Petrofac, Arriva, Sibir Energy, Informa, Bodycote, Cattles, Carnival.

FRIDAY: Results/updates: Davis Service Group.