The Week Ahead: Fears over China growth prospects chill Burberry

Click to follow
The Independent Online

For so long the darling of the City, Burberry has rather fallen out of fashion over the past few weeks. In July the upmarket brand's share price reached 1,600p but a recent slump means has pushed it down 25 per cent on that peak.

While the fall came alongside the wider market sell-off, Burberry has been particularly badly hit, thanks to fears about China's growth prospects.

In common with its peers, the firm has benefited from a huge boom in the country's demand for luxury goods, so the retailer's comments on trading in Asia, when it releases its first-half trading update on Wednesday, should make for interesting reading.

UBS's Fred Speirs will be keeping his eye out. He says that any update on the situation in China would be "critical to [the] share price reaction".

More generally, Mr Speirs forecasts that the company will announce total sales for the period of £806m, a 27 per cent rise.

Seymour Pierce's Kate Calvert, meanwhile, is slightly more bullish, predicting sales will reach £828m. She says Burberry will "report strong second-quarter trading", although she warns investors will be on the lookout for signs that department stores in the US may be cutting back their wholesale orders for 2012.

Some in the City are also expressing concerns over the state of Burberry's margins. Nomura's Fraser Ramzan points out that the company has already said that its operating costs for the year will be weighted towards the first-half and he, therefore, predicts a 0.5 per cent drop in earnings margins for its retail and wholesale operations.

Nonetheless, he still believes in Burberry's growth strategy, saying that the investments it has made this year means "arguably some of the greatest gains [are] to come".



TODAY

at the time of the recruiter's half-year results in August, Michael Page chief executive, Stephen Puckett, said he believed the company remained on course to post a pre-tax profit tax for the year of £110m. Peel Hunt says this "is unlikely still to be the case", warning that despite the group, which issues its third-quarter results today, continuing to be "exposed to growing economies, we now see downside risk to estimates for the next few months".

Results/Updates: Michael Page.



TOMORROW

Results/Updates: N Brown and Robert Walters.



WEDNESDAY

after cautious outlook comments by its rival, Wolseley, last week, builders' merchant Travis Perkins's update on Wednesday will be closely examined for further clues as to what the future holds for it. The company was not optimistic when it published its interim figures in July and the downgrades that followed as a result prompted Numis's Howard Seymour to say that "third-quarter trading to date will, therefore, take on more importance than would be traditionally be the case".

The analyst says the firm's like-for-like growth will be down on the figure for the first-half of the year, thanks to tough comparatives, and he is also looking for further comments on its self-help measures and the situation with BSS, the plumbing supplies group that it bought in 2010 for £557m.

Results/Updates: Burberry, Fresnillo and Travis Perkins.



THURSDAY

investors will be hoping for further comments from Labrokes on how its talks with takeover target Sportingbet are going when the bookie updates the market on Thursday.

In terms of its performance over the third quarter, Citigroup's James Ainley says that – partly thanks to the tough comparison with last year when the World Cup was being staged – Ladbrokes will reveal "sluggish trading", with its net revenue dipping 0.5 per cent. Meanwhile, outside the UK, the analyst is forecasting revenue will be down 5.1 per cent, with a 12.4 per cent slump in Belgium – because of tax regime changes.

Also in focus on Thursday will be Renishaw, as the precision engineer unveils its first-quarter figure at its annual general meeting. Numis's Scott Cagehin predicts trading will have been "robust", although he warns that there is likely to be "some management caution on outlook given the current economic uncertainty".

The analyst says that the company's weights-and-measures products will drive its revenues and profits, with China, especially, proving a source of strength. Nonetheless, he does point out that "given its limited visibility of around six weeks, Renishaw should see any change in trading patterns very quickly".

Results/Updates: Ashmore, Booker, Grainger, Hargreaves Lansdown, Ladbrokes, Renishaw, Rio Tinto and WH Smith.



FRIDAY

Results/Updates: Computacenter and Jupiter Fund Management.

Economics Diary

Today

Eurozone Sentix Investor Confidence.



Tomorrow

BRC retail sales monitor;

Industrial production;

NIESR monthly GDP estimates;

RICS house price balance.



Wednesday

Eurozone industrial production; Unemployment data.



Thursday

EBC monthly report;

US trade balance.



Friday

Eurozone CPI;

US business inventories;

US retail sales; US University of Michigan confidence data.

Comments