The supermarkets will be in focus this week, with both Sainsbury's and Tesco set to issue updates.
Tesco is up first, with interim results and a management report tomorrow. Jefferies expects the update to confirm the supermarket giant has continued to lag behind its peers in the UK, forecasting second quarter like-for-like sales growth, excluding VAT and fuel, of 3.5 per cent, compared to the 4.3 per cent achieved in the first quarter.
UBS, which is looking for 3.25 per cent growth over the same period, said the slowdown reflects "tougher comparatives, fading inflation and less helpful weather, especially in July".
The broker added: "We expect modest expansion in the [earnings] margin, reflecting a stringent approach on costs, lower fuel prices and slightly lower losses on Tesco Direct. This should deliver around 7 per cent growth in first half [earnings]."
Looking ahead, consensus estimates should remain intact, according to Shore Capital. Deutsche Bank is also optimistic, saying that growth in the second half should be stronger. "We still forecast 14 per cent underlying [earnings] growth for the full year," the broker added.
Sainsbury's will publish a trading statement on Wednesday. Again, like-for-like sales, excluding VAT and fuel, are expected to slow, with UBS forecasting 5.5 per cent growth over the second quarter, and Jefferies looking for 5.6 per cent. "This is down from 7.8 per cent in the first quarter, but remains at a premium to the peer group, albeit the gap may be narrowing," UBS said, adding that, despite the moderation in the pace of growth, the group's "performance remains comfortable" in the context of consensus forecasts for the full year.
Today: Results/updates: Minerva and PZ Cussons. Others – British Airways traffic and capacity statistics for September.
Tomorrow: Even with recent strength, a positive update from Northern Foods, the food producer due to publish a half year pre-close statement tomorrow, could yield further upside for shareholders, according to Citigroup. "Trends at M&S Food [which makes up for around 27 per cent of group sales] show a good directional correlation with Northern's chilled business," the broker said, adding: "With M&S like-for-like trends improving over the last quarter and overall trends still positive, we expect a further robust like-for-like performance in chilled for Northern."
Also tomorrow, don't expect any surprises with Chloride's trading update, says Numis. "We believe that the short term outlook for the business remains challenging with its standard product sales down around 15 per cent," the broker said. "On the positive side, management has taken appropriate actions to align the cost base, its industrial systems business (16 per cent of group sales) is growing at double digit rates and its service business (34 per cent of group sales) continues to remain strong, commanding high margins."
Results/updates: Business Post, Mouchel, Chloride, Northern Foods and Tesco.
Wednesday: The staffing group Michael Page International is due to post a third quarter update midweek and, given the publication of the first half results in August, the focus is likely to be on the performance between July and September, according to Numis, which highlighted the fact that year on year comparatives "are now getting progressively easier". "At this stage, we believe share price sentiment with the staffers is less about the magnitude of the downturn and more about the potential timing of improvements," the broker said.
Results/updates: Hunting, Sportingbet, Michael Page International and J Sainsbury.
thursday: Results/updates: Carphone Warehouse, Hays, Rank, Vedanta Resources and Victrex.
Friday: The interim management statement of Wood Group is likely to be cautious, according to UBS, which expects the update to focus on the relative resilience of the oil services group's businesses rather than on growth opportunities. The broker expects revenues for the second half of the year to come in at $2.4bn, down 11 per cent year on year, with $163m in operating income, down 30 per cent year on year.
"We expect slight improvement in the performance of the Well Support division due to [the] recovery of rig count in [the] US since June," UBS said. "We believe cash flow will continue to be good, with [$75m in free cash flow for the second half] and full year to remain around $195m."
Results/updates: Wood Group. Other: weekly sales figures from John Lewis.Reuse content