The Week Ahead: Kesa set for gloomy Christmas sales figures

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The Independent Online

Kesa Electricals is expected to reveal evidence of further deterioration in trading when it reports on Christmas sales this week. Citigroup forecasts a 13 per cent slump in like-for-like sales at the group’s Comet chain, while UBShas pencilled in a 12.5 per decline for the 10 weeks to early January.

Darty, the group’s French business, is expected to have fared better, with a 5 per cent slide in like-for-like sales.

“The investment debate for Kesa revolves around two main themes,”

Citi said. “Firstly, how much further will the UK, French and Spanish consumer environments deteriorate during 2009 and 2010; and secondly, will the backing of around £300m of non- UKproperty assets, cash [generative] formats and a strong balance sheet provide a floor under the valuation?”

Unhappily for investors, the broker, which maintains a “sell” rating on the group’s stock, reckons that as long as macro conditions in the UK, France and Spain worsen, the market is likely to “ignore property strip arguments and discount forecasts accordingly”.

TODAY: Results/updates: None.

TOMORROW: Land Securities is due to publish a third-quarter update and, after the announcement of the Trillium sale earlier this month, UBS expects the statement to focus on the performance of the group’s core business.

“Given that there are unlikely to be any numbers concerning values, investors will monitor void levels and progress on lettings,” the broker said.

“Overall voids were 6.3 per cent in September, with shopping centre voids at 5.7 per cent. The group (with Liberty International) is developing a shopping centre in Cardiff for completion in 2009, which was 33 per cent pre-let in November 2008.”

Also tomorrow, JDWetherspoon is due to publish a trading statement.

Analysts expect margins to remain under pressure as the group moves to protect revenues by turning more aggressive on pricing. Beyond the sales picture, analysts have also been highlighting the group’s debt position, with Deutsche Bank arguing that JD has “the biggest refinancing hurdle to overcome” in its peer group. “We see themarket becoming more focused on the group’s debt position as we progress through 2009, given that it has the most imminent of refinancing deadlines of any of the pub stocks – all of which materially underperformed JD in 2008, mostly due to debt concerns,”

Deutsche said, adding: “If it has to hack into the group cost base to help with the refinancing, it may delay any recovery coming out of the recession.”

Results/updates: Burberry, Cairn Energy, Invensys, IG Group, Kesa Electricals, JD Wetherspoon, Land Securities.

WEDNESDAY: Results/updates: None.

THURSDAY: Citiwarns of an uncertain outlook for Bluebay Asset Management, the fund manager which is due to post a quarterly trading update this week. The broker expects assets under management (AUM) to slump 19 per cent to $16.7m. “We expect Bluebay to update guidance on flows … If it can disclose cost-cutting or other plans to offset the impact of lower AUM on earnings, we would see that as a positive catalyst,” Citi said.

It added: “Longer term, Bluebay should benefit from cyclical growth in investor demand for corporate credit as markets recover. However, the timingandextent of the recovery is uncertain, and Bluebay needs to steer its way through current difficulties to be able to capture future fund flows. This is no easy task: poor investment returns and fund restructurings have increased the risk of outflows.”

Also on Thursday, Chemring is due to post preliminary results. The house broker, Investec, is looking for £74.1m in pre-tax profits, with £345.3m in sales. The consensus is slightly ahead, forecasting £75.72m in pre-tax profits and £352.43m in sales.

Results/updates: Enterprise Inns, Great Portland Estates, Chemring, WM Morrison, Aberdeen Asset Management, Bluebay Asset Management.

FRIDAY: The pub group Marston’s is due to publish a first-quarter trading statement, and, given the worse than expected deterioration in Punch Taverns’ leased business, analysts expect the focus to fall on the performance of the group’s leased pubs division.

Also on Friday, GDP data for the fourth quarter of 2008 is expected to confirm the UK’s slide into recession, with UBS analysts forecasting a quarter- on-quarter contraction of 1.3 per cent. “We believe we will not see a positive quarterly GDP figure until the first quarter of 2010,” UBS said.

Results/updates: Marston’s.



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