The Week Ahead: Grocers next to face up to consumer slowdown
Monday 13 June 2011
The supermarket sector will be in focus this week with both Tesco and Sainsbury's set to post updates.
The trading figures come against the backdrop of increasing concern about the depth of the consumer slowdown as the Chancellor George Osborne sharpens his axe. The public sector has yet to see the worst of the cuts – but already, the high street appears to be struggling to deal with the dip in sentiment. Last week, figures from Argos owner Home Retail Group chilled the mood across the retail sector, and the two supermarkets will be closely watched for their comments on sector trends.
Tesco is up first with its update tomorrow. In the City, Panmure Gordon expects the group to report UK like-for-like sales, excluding petrol and VAT, to move into positive territory over the company's first quarter, compared to the 0.7 per cent decline seen in the fourth quarter. Its analysts are eyeing 1 per cent growth, while their counterparts at Espirito Santo are looking for 1.5 per cent, excluding petrol but including VAT, against 0.2 per cent in the fourth quarter.
Given the weak consumer backdrop, which is expected to weigh on the non-food offering, and given that new chief executive Phil Clarke only took the helm very recently, there are unlikely to be any big surprises. "This will be almost a 'nothing to see' announcement, with little to drive the shares in either direction, because it is too early in Phil Clarke's tenure to be categoric one way or the other," Panmure said.
Sainsbury's is up next, with its first quarter update on Wednesday. Here, Espirito is looking for like-for-like sales growth of 2.5 per cent, again excluding petrol but including VAT.
"This will be an interesting update from Sainsbury in order to see the extent to which the slowdown in the fourth quarter has continued," the broker said. "At the time, we thought there may have been a short-term pullback in promotions, and this seems to have been confirmed by recent management comments at the full-year results."
Results/Updates: BAA, Latchways and Majestic Wine.
Results/Updates: Air Partner, CML Microsystems, Carphone Warehouse and Tesco.
The video games retailer Game is due to issue an interim managementstatement mid-week and, if Numis Securities is to believed, the group is unlikely to impress.
The broker was surprised by the company's decision at its preliminary results in April to leave its January 2012 guidance for sales growth of 2 to 5 per cent unchanged. "Worldwide sales of Nintendo 3DS have clearly been lower than planned, and we think that Game will struggle to widen the outperformance gap in an overallmarket expected to remain in negative territory," Numis said.
Results/Updates: Game, Mouchel and J Sainsbury.
Mulberry is expected to post strong full-year figures this week. The hopes are based on the upmarket handbag maker's update in March, when it said sales and profits for the year would exceed market views as a result of strength in both UK and export sales.
"Investors will be keen to assess growth rates achieved since year end, with the order intake for the Autumn 2011 collection having been described as 'encouraging' in March, and wenoted with interest the strong performance in the 'non-apparel' category reported by Burberry at the end of May," Altium analysts said.
"Progress on planned expansion across core territories will also be a key point of focus given the significant growth potential in some of the largest global luxury goods markets, where Mulberry's present footprint remains extremely low."
Also on Thursday, the industrial equipment hire firm Ashtead will post its annual figures. Numis Securities is forecasting a good performance, expecting the company to report 12 per cent growth in revenues to £936m, with £286m in earnings before interest, tax, depreciation and amortisation. Pre-tax profits are estimated at a healthy £30.7m.
"The key for investors will be the outlook for the current year, particularly rental rates which started to improve during (the 2010-2011 period)," the broker said.
"We believe that Ashtead will continue to enjoy a cyclical upswing to add to the structural trend of more contracting out to rental companies rather than direct ownership."
Results/Updates: Ashtead, WS Atkins Consort Medical, Premier Farnell, Umeco and Mulberry.
Results/Updates: None significant.
Bank of England Quarterly Bulletin for the second quarter; UK regional PMI data.
RICS UK housing market survey; Monthly inflation figures; CML regulated mortgage survey; DCLG house price index; Manpower quarterly UK employment outlook survey.
Scottish retail sales monitor; Monthly unemployment figures; Chancellor George Osborne delivers annual Mansion House speech.
Monthly car production figures.
Eurozone trade balance figures.
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