The slowing economy and the scourge of the credit crunch have made investors increasingly nervous. And beyond the banks, the alarm bells are ringing loudest in the retail sector: leading stocks have taken a hit as a series of profit warnings have made the market wary of the slightest ease-up in trading. So, this Wednesday, when the Argos and Homebase-owner Home Retail Group unveils its full-year results, investors will be on the alert for any clues about the health of the high street.
As JPMorgan notes, while the company does not normally comment on current trading in its full-year results, if sales over the first two months of the year have been materially different from market expectations then it may well issue an update this week.
"This is not impossible ... UK retail sales clearly took a downward lurch in March, and the DSG [International] profit warning on 10 April pointed to increased competitive pressure in UK electricals, Argos's largest category," the broker said.
"In DIY, we assume that a soft environment will have got notably worse heading into peak season during March and April, when last year's weather was very favourable for seasonable merchandise."
TOday: The hospitality group Whitbread is due to publish its preliminary results for the 12 months to the end of February 2008.
The numbers will be complicated by recent disposals, which include the £925m sale of the David Lloyd leisure business in August 2007. The David Lloyd sale followed earlier disposals of the Marriott Hotel business, the Britvic joint venture, the Pizza Hut and TGIF joint venture and 230 pubs.
These sales have left the company focused on the Premier Inn budget hotel chain, which accounts for more than 70 per cent of group profits. The focus, therefore, will be on continuing figures, and here Citigroup forecasts earnings before interest and tax of £232m, ahead of £204m last year, and pre-tax profits of £204m, ahead of £167m in 2007.
Results/Updates: Advent Capital, Hexaware Technologies and Whitbread.
Tomorrow: The retailer Game Group is due to publish its full-year results, and Deutsche Bank expects the focus to fall on first-quarter sales. "This is substantially the toughest comparative of the year, due to the Sony PS3 launch in March 2007," the broker said, forecasting 9 per cent growth in UK like-for-sales for the period.
Deutsche is less optimistic about international sales, which it thinks will be hit by performance in Spain: "[First-quarter like-for-likes] in the international division are likely to be significantly lower than the UK ... we anticipate -2 per cent LFLs ... based on -10 per cent [in] Spain and +5 per cent in other territories."
Results/Updates: Arm, BP, Royal Dutch Shell, Superglass, N Brown, Johnson Service and Game Group.
WEdnesday: BSkyB is due to publish its third-quarter results and Morgan Stanley is looking forward to some "solid figures". The broker said: "We expect the company to report net DTH [direct-to-home] additions slightly up year on year, despite the tough consumer environment. At the same time, we expect a continuing strong performance in broadband and Sky talk net [additions]."
Looking forward, Morgan Stanley notes the regulator Ofcom is likely to clarify its provisional thoughts on the pay-TV review by the end of the current quarter.
The broker's comments on the matter should cheer worried investors: "While regulatory noise is unlikely to be helpful to Sky in the short term, our view remains that Sky will be relatively unscathed by this process, given Ofcom has concluded that consumers are relatively well served by the UK pay-TV market, and that Sky does not make outsized returns."
BG Group, which is due to publish its first-quarter results, is expected to reveal news of robust growth. Merrill Lynch, which says the company "remains a core holding within Euro oils", forecasts adjusted net income of £680m, up 52 per cent year-on-year and 22 per cent sequentially. At the operating level, the broker forecasts earnings before interest and tax of £1.222bn.
"We see best-in-class top line [exploration and production] volume growth and a yet-to-be-fully-appreciated [liquefied natural gas] pricing story as underpinning the shares relative to sector peers in the near term," the broker said.
Results/Updates: Dana Petroleum, Standard Life, Shed Media, BG Group and BSkyB.
Thursday: Results/Updates: Smith & Nephew, Thomson Reuters and Tomkins.
Friday: Rentokil Initial is due to publish a first-quarter update and Citigroup expects to hear news of £40m in earnings before interest and tax against £52m the year before.
The comparison, the broker adds, will be heavily skewed by the loss in the Parcels division. Ex-parcels, Citigroup forecasts underlying group earnings before interest and tax of £46.9m, up 12 per cent from £41.8m the year before.
"Key [business] lines to watch are textiles/washrooms [which make up 27 per cent of sales] and [pest control, which contributes 14 per cent]," the broker added, noting the margin recovery potential in the business and reiterating its "buy" stance on the stock.
Results/Updates: Rentokil Initial.Reuse content