The Week Ahead: Soft sales growth seen at UK's supermarket giants

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The Independent Online

The grocery market will come under the scanner this week, with Tesco set to post quarterly figures tomorrow and Sainsbury's set to follow suit on Wednesday.

Both are expected to report soft sales growth across their domestic businesses owing to the impact of UK food price inflation, which is lower year on year. Beyond that, the two may be questioned about their hopes – and fears – ahead of the coalition Government's emergency Budget on June 22.

"There is some uncertainty surrounding the food retailers as we approach the emergency budget," Execution Noble analysts said last week. "Whilst VAT on food across the board remains unlikely, we have seen increasing speculation that there could be some kind of 'fat tax', with VAT applied to unhealthy foods such as crisps and fizzy drinks."

Tesco should, however, benefit from growth in its international business, with the Royal Bank of Scotland expecting to hear of a boost from improvements in like-for-like sales, new space and from recent foreign exchange moves.



Today

Results/Updates: – Majestic Wine.



Tomorrow

The housebuilder Bellway is due to issue an interim management statement, and the occasion should provide some welcome insight into housing market trends.

Like some of its peers, Bellway's shares are down sharply since the beginning of May, partly owing to the general dip in sentiment caused by the European debt crisis, and partly because of growing concerns about the outlook for the housing market.

Recent house price surveys have only served to add to the caution, with the latest figures from the Nationwide, for instance, showing a slowdown in the pace of growth.

Despite this backdrop, Numis doesn't expect a negative surprise, saying Bellway is likely to report that "conditions are materially unchanged since the last update with a stable sales rate and flat prices". In a preview published last week the broker said: "We feel the shares have been oversold and we would buy ahead of the update."

Also tomorrow, high-tech tool maker Oxford Instruments is set to post its full-year figures, and Altium reckons the company may beat market hopes with the news on trading.

"In previous years, the group has had to push hard in the final month of the year to ensure all shipments were made and that expectations were met," the broker said. "However, trading throughout last year was consistently ahead of the previous year and this time round, the group seemed far more relaxed as it entered the final month."

Looking ahead, Altium expects the company to draw steam from emerging markets, saying: "In the current year, the group is likely to see a return to growth in its end markets and we believe that demand in China in particular should be very strong."

Results/Updates: CML Microsystems, Record, Oxford Instruments, Bellway and Tesco.



Wednesday

Translation services and technology firm SDL is set to host a presentation for analysts and investors this week, and the City is looking forward to an update on the company's strategic plans.

Panmure Gordon said senior management should provide more detail on products, and shed more light on how the digital business world is evolving.

"The event showcases progress at the content technology division, which is the company's key near-term growth driver as it taps into the front end of a recovering economy," the broker said, reiterating its "buy" view on the stock last week.

Results/Updates: Liontrust Asset Management, Safestore and J Sainsbury. Others: SDL Analyst/Investor day.



Thursday

The video games retailer Game is due to post its interim management later this week and, given the recent update on Argos, investors will no doubt be curious to learn how business has held up in recent months.

Like-for-like sales at Argos were down by more than 8 per cent over the 13 weeks to the end of May, according to last week's update from parent company Home Retail Group, with the declines being partly pegged on a weak video games market.

Also on Thursday, the equipment rental group Ashtead is due to issue full-year results and, given the company's high operational and financial gearing, Numis expects investors to focus on the firm's outlook as key markets emerge from recession.

"We expect pressure on rental rates to reduce in the United States, which accounts for around 85 per cent of earnings before interest, tax and amortisation, as the economy edges out of recession," the broker said. "With significant capacity leaving the industry and economic recovery gathering pace, we expect an improving outlook through the year."

Results/Updates: Consort Medical, WS Atkins, Ashtead and Game.



Friday

Results/Updates: None significant.

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