The Week Ahead: Sainsbury's to give clues to outlook for sector

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The Independent Online

The outlook will be key when the supermarket chain J Sainsbury posts its second-quarter update on Wednesday. Citigroup and Panmure Gordon analysts anticipate like-for-like sales growth of between 3.5 and 4 per cent, excluding fuel, while JP Morgan forecasts a 4.7 per cent hike in the 16 weeks to 4 October.

On the upside, the forecasts imply an improvement on the previous quarter. But on the downside, the comparatives have eased considerably.

"It is what happens from now on that worries us," said Panmure Gordon. "We think that the sector as a whole will see declining volume and margin pressure over the next 12 months as inflation peaks and the consumer continues to tighten his purse strings."

JP Morgan reckons that the tone of the conference call will be important, adding: "The consensus that Sainsbury can increase [earnings by around £70m in 2010] is a stretch and management may start encouraging analysts [to move] away from such an assumption."

Today: Results/updates: None

Tomorrow: The staffing group Michael Page International is due to publish a third-quarter update, and Collins Stewart is anticipating evidence of a further sharp slowdown in gross profit growth.

"We forecast the update to show gross profit of £142.4m, [up 15 per cent], a slowdown from the 27 per cent growth in the second quarter," the broker said in a preview note. It added: "We expect growth to decelerate in all regions and to go negative in the UK (-5 per cent versus +1.2 per cent in the second quarter). The absolute gross profit figure will benefit by £8m from foreign currencies strengthening against sterling."

UBS, which also forecasts a "significant deterioration" in growth, said: "Conditions in both the UK and Australian markets have deteriorated sharply in the past few months; Europe remains relatively strong but is, however, declining rapidly."

Mouchel, the consulting and business services group, is due to publish preliminary results tomorrow and Panmure Gordon is anticipating news of £38m in full-year pre-tax profits with 23.3p in earning per share.

"Earnings estimates were increased in early March 2008, following the first-half results, and have been solid since. Mouchel tend to deliver results slightly ahead of expectations and this should provide the catalyst to get the shares moving up," the broker said in a preview note, switching its stance on the company's stock to "buy" from "sell".

Also tomorrow, N Brown, the home shopping group, is due to publish interim results and, despite the gloom besieging the wider retail sector, Citigroup, forecasting a 10 per cent hike in sales, expects the company's niche market to prove resilient.

"For the 17-week period to 28 June, group sales were up 12.3 per cent, compared with 12 per cent for the first eight weeks," the broker said in support of its case. "Sales were particularly strong during the sunny spell in May, which coincided with the mailing of the summer catalogues, which include 15 per cent more pages [and] new designer ranges."

Citi added that while around 45 per cent of N Brown's sales are made on credit, the company's exposure to bad debts is reduced as its average customer is 58 year old and typically without a mortgage.

Results/updates: Northern Foods, Mouchel, N Brown, Michael Page.

Wednesday: Results/updates: J Sainsbury.

Thursday: The oil services specialist Wood Group is due to publish an interim management statement and, given the recent interim results announcement, Evolution Securities is not anticipating any surprises.

"The market will be looking for signs of any impact on Wood's business caused by the Hurricane Ike disruption in the Gulf of Mexico and/or any fall-out from the general US slowdown," the broker said, pointing out that, on the latter point, the chief executive of the rival group Schlumberger has said that it is too early to gauge the effects of the slowdown on the sector.

Also on Thursday, the bakery chain Greggs is due to publish an interim management statement, and according to Citigroup, the worst may be over for the company as cost inflation shows signs of moderating. "While we do not rule out further downside to earnings, cost growth going forward would appear more easily offset by increased selling prices," the broker said, adding: "The new chief executive, Ken McMeikan, is now at the helm, and we believe a new pace of change, and potentially strategy, could interest the market."

Results/updates: C&C, WH Smith, Greggs, Wood Group.

Friday: UBS expects an upbeat statement from Admiral, the insurance group that is due to publish a third-quarter update at the end of this week.

"We expect positive comments from the group on market premium rates, which we believe have started to show signs of sustained increases," the broker said, adding: "There could also be a further update on the group's international operations in Spain, Germany and Italy."

Results/updates: Renishaw, Admiral.