The Week Ahead: Sainsbury's expected to reveal sales slowdown

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The Independent Online

The headwinds facing consumer spending will be in focus again on Wednesday, as J Sainsbury updates the market on its performance over the past 10 weeks.

Jefferies International is one of those expecting the supermarket to reveal a slowdown in its like-for-like momentum, saying that "as the most geared of UK grocers, the company is more exposed to persistently low levels of UK demand".

The broker's analysts are predicting like-for-like growth of 1.3 per cent – down from 2.8 per cent the previous three months – and says it believes that as "already publicly acknowledged by Sainsbury in early February, UK demand has been weakening post Christmas, and we do not expect [it] to have escaped this trend".

Royal Bank of Scotland is more positive, predicting sales will have grown 3 per cent, and although it expects Sainsbury to be cautious on the condition of the food retail market, the broker does believe the management will "talk about how it is performing well in a challenging consumer environment".

Therefore, RBS's analysts expect Sainsbury to remain bullish on its outlook, despite the problems facing consumers such as an increase in fuel costs and worries over employment.

"We will have to wait for specific company guidance for [the next financial year] in terms of factors such as cost inflation," they say. "Nevertheless, Sainsbury's track record over recent years has been pretty good, with ongoing productivity improvements offsetting most of its underlying cost inflation, a trend that we expect mostly to continue".



Today

The blue-chip energy group Essar Energy kicks off the week with its full-year results on Monday, the first for the group since it floated last April. Nomura's John Musk notes his expectations are slightly more bearish than the rest of the market, but says he remains "concerned by some of the underlying themes that are affecting the progress of power plant development". However, he does admit "there is slight upside potential to our ... estimates from improving refining margins at the back end of 2010".

Results/Updates: Essar Energy.



Tomorrow

Results/Updates: Cairn Energy and Forth Ports.



Wednesday

With a rise of around 15 per cent since the end of November, Smiths Group has had a decent run in recent months, helped by the fact it received a bid worth £2.45bn for its medical services business. Despite the approach being rejected, Numis Securities' Scott Cagehin believes the engineering group "remains a break-up story that

should eventually unlock value to shareholders".

In terms of its interims, out on Wednesday, Mr Cagehin is expecting "solid results showing that first half trading has generated underlying sales growth and further progress has been made in delivering its cost saving programme, driving operational efficiencies."

Results/Updates: ENRC, Ferrexpo, Melrose Resources, Portmeirion, J Sainsbury and Smiths Group.



Thursday

Kingfisher releases its preliminary results on Thursday in the wake of worrying comments made last week by the group on the state of the non-food retail market. The head of the B&Q owner said trading in the sector has apparently got worse since Christmas, although the home improvement sector sector seems to have held up better.

Jefferies International is certainly one positive voice, with the broker saying Kingfisher "offers a compelling investment case given a resilient positioning in a challenged UK market, a solid gearing to an improving French backdrop and strongly accelerating growth in emerging geographies".

Its analysts believe the results will confirm the potential of Kingfisher's gross margin, one of two particular areas of focus in what they say will be a particularly important update where they expect "management to outline its longer-term thinking on the shape and potential for the group".

The other aspect of particular interest, they say, will be its "ambitions for an acceleration in physical expansion, supported by the strong spare cash flow capacity ... (and focused on markets outside the UK and France)".

Also releasing an update on Thursday is Next, and the fashion retailer's full-year figures is expected by Royal Bank of Scotland to show a profit-before-tax of just over £550m, a rise of over £45m from the previous 12 months.

Results/Updates: Imperial Tobacco, Kingfisher, Next, Premier Oil, Resolution, Salamander Energy and United Utilities.



Friday

Results/Updates: None.

Economics Diary

Today

Rightmove House Price index; US Chicago Fed national activity index; US existing home sales.



Tomorrow

CBI total orders; CPI; Public sector net borrowing data; RPI.



Wednesday

Annual Budget; Bank of England MPC meeting minutes; BBA mortgage approvals; EU industrial new orders; US new home sales.



Thursday

Retail sales; US durable goods data; US weekly jobless claims.



Friday

US GDP; US University of Michigan consumer sentiment.

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