The Week Ahead: Snow and VAT expected to knock Wetherspoon
Monday 17 January 2011
As the first pubs company to report on trading over the Christmas period, JD Wetherspoon is likely to excite considerable interest in the sector when it releases its interim management statement on Wednesday.
Not surprisingly, it will be December's poor weather conditions that are the focus, especially considering the mixed messages coming from the various retailers which updated the market last week. Pub groups such as Wetherspoon are particularly vulnerable to bad weather, given that missed spending is unlikely to have been made up at a later date.
Espirito Santo Investment Bank (BESI) is certainly not positive, noting that anecdotal evidence from independent pubs suggests that the trading days leading up to Christmas were badly hit by the heavy snowfall across the UK. As a result, the broker is expecting a "disappointing second-quarter performance", while Hugh-Guy Lorriman, of Seymour Pierce, believes a fall in like-for-like sales of between 1 and 2 per cent because of the weather "seems a not unreasonable inference".
BESI's analysts were also cautious about the immediate outlook, warning of the harm that could be caused to the group by the rise in VAT. "Our view remains that, relative to the rest of the pub companies, Wetherspoon is the worst-placed operator to pass on price inflation," they said, pointing to a BESI survey which suggested that Wetherspoon's core consumer was "more likely to cut spending or shift spend to the off trade".
The numbers included in Burberry's third-quarter trading update are expected to be positive, says JP Morgan Cazenove. It forecasts "a strong quarter for the luxury sector as a whole given ... executives' comments [that foreign exchange rates have] remained favourable to the traveller and US luxury datapoints".
The broker's analysts are predicting that underlying sales will increase by nearly 20 per cent, with retail sales up 36 per cent thanks partly to China. However, they note that takeover speculation has seen Burberry's share price rise significantly recently, and they therefore state that although "we continue to like the long-term equity story, valuation looks full and we see no near-term positive catalyst".
Results/Updates: African Barrick Gold, Burberry, Carphone Warehouse, Chemring, Experian, IG Group, Polymetal, Rio Tinto, SABMiller, Safestore and Taylor Wimpey.
A trading update from Pearson should see the publishing group provide investors with information on earnings ahead of next month's full-year results. Alastair Reid, of Deutsche Bank, believes that the company's current earnings per share guidance of 72p will be reiterated "at the very least ... and possibly could be upgraded".
Mr Reid is predicting that Pearson's Penguin Books unit will benefit in the fourth-quarter from strong e-reader and e-book sales, while strong advertising trends and increasing readership on new platforms should ensure robust profit growth at the Financial Times.
Results/Updates: Asos, Hochschild Mining, JD Wetherspoon, Land Securities, Pearson and William Hill.
Associated British Foods releases its interim management statement, and analysts are expecting the market to examine two factors in particular – the state of the UK suagr beet harvest, and how ABF's discount clothing chain Primark performed over Christmas.
Martin Deboo, of Investec, says he finds the latter "hard to call", but is cautious about the former. He believes "there have been some snow-related impacts on the ... harvest that might have the potential to take a little of the lustre off the sugars story".
In terms of its share performance, Mr Deboo – noting ABF's strong recent run – says he continues "to feel positive about sugars, but now the debate shifts to valuation".
Douglas Jack, of Numis, is relatively optimistic about the interim management statement from Enterprise Inns, also out on Thursday, especially the numbers for the snow-hit festive period, which he believes will not be "as bad as was originally feared".
The pubs group is aiming to see flat like-for-like profits by the end of the financial year, achieved through a number of methods including tail-end disposals, but Mr Jack says that Numis's forecasts assume profits increasing from minus 5 per cent to minus 2 per cent by the fourth quarter.
Results/Updates: Associated British Foods, BHP Billiton, easyJet, Enterprise Inns, Invensys, Man Group, NCC Group and St James's Place.
Results/Updates: Close Brothers.
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Tomorrow: Consumer price inflation; DCLG house price data; Retail price inflation; RICS house price survey; US Empire manufacturing.
Wednesday: Average weekly earnings; Claimant count, ILO unemployment rate; US MBA mortgage applications.
Thursday: CBI business optimism; CBI industrial trends; US existing home sales; US initial jobless claims; US Philadelphia Fed survey.
Friday: Retail sales.
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