The Week Ahead: Little cheer for retailers after bad winter and VAT
Monday 14 March 2011
After extreme weather hit the festive period, it is no secret that – with the rise in VAT just one of its headaches – the retail sector has suffered a tough 2011, and Debenhams aren't expected to produce any positive surprises tomorrow.
UBS believes its UK sales will have slowed by around 3 per cent over the past seven weeks, although the broker does predict the group's figures will look slightly healthier overall thanks to Magasin, the Danish department store business it bought in 2009 for £12.3m.
Kate Calvert, an analyst at Seymour Pierce, feels synergies from the acquisition will mean its gross margin should see an improvement from last year, although she hopes Debenhams "will break out Magasin from the numbers... so that the UK performance is clearer."
Although Calvert gives it a "buy" rating, saying "its valuation is undemanding for its future growth prospects", she adds it was "difficult to see how its shares and the sector will perform in the short term given the economic headwinds and rising commodity prices".
Nomura agrees that the rest of the financial year will not bring much cheer, but its analysts are expecting some growth in the following 12 months "given this year's weather disruption, recommencement of the rolling refurbishment program and continued market share gains."
It released a detailed trading update back in January, so Bovis Homes' preliminary results – released today – are not expected by Numis Securities' Chris Millington to surprise. There will be interest, believes the analyst, in how the housebuilder sees trading in the current environment as well as "its progress on its strategy to increase asset turn through increased outlets and potential land swaps from large sites".
Results/Updates: Bovis Homes.
G4S updates the market with its preliminary results on Tuesday off the back of a good run for the blue-chip security services group which has seen its share price gain over 10 per cent since the beginning of December. Analysts from Panmure Gordon are expecting it to reveal profits-before-tax of £421.7m, towards the top end of the market consensus, and anticipate a "pick-up in organic growth".
They also feel it will benefit from the increased reliance on outsourcers from the public sector in the UK, and note that comments from its peers regarding Government contracts "do not show much pricing pressure... so this could be a source of upside potential as we progress through the year".
Results/Updates: Close Brothers, Debenhams, G4S and Royal Dutch Shell.
Over the past year, Greggs has highlighted the good value of its baked products, so Wednesday's preliminary results will be an opportunity to see how it has been performing in the current economic climate. Analysts from Shore Capital believe it will release an "encouraging set of results against a very challenging UK consumer and commodity backdrop", and predict its annual pre-tax profit will increase by more than 7 per cent. However, they expect trading for 2011 will "have remained subdued", but add that they are confident "sales growth will modestly accelerate as we move through the year... driven by the self-help initiatives across the group".
Results/Updates: Greggs, Hikma Pharmaceuticals and Marston's.
With Legal & General's full-year results, JP Morgan Cazenove feels a major point will be "whether there is any further surprise potential in [its] figures, or whether the market is now more or less up with events given the great steps in transparency the group took in 2010". The broker is expecting impressive numbers thanks to strong equity markets, while it also assumes that Aviva's recent results means "annuity pricing remains favourable".
The global advertising sector has seen a decent set of updates recently, with WPP, Omnicom and Publicis all releasing strong figures. Numis Securities is optimistic about Aegis' preliminary results, noting that for the third-quarter it "reported the strongest... organic growth rate of the larger agency groups".
As it is the first full-year results from the group's new management, the broker expects its guidance for the year ahead will "remain cautious, whilst highlighting the potential benefits to both margins and revenues from [its] strategy of focusing on cross-selling media buying clients additional products and services, fulfilling demand for fully integrated media campaigns".
Results/Updates: Aegis, Investec, Legal & General, Premier Farnell and SIG.
Results/Updates: Jupiter Fund Management.
EU industrial production.
US Federal Open Market Committee meeting; US import and export price data.
Average earnings index; Claimant count change; US PPI.
CBI industrial order expectations; Consumer inflation expectations; US CPI; US Philadelphia Fed survey; US real earnings.
Consumer confidence index.
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