The Week Ahead: Well-targeted advertising pays off for M&S
Monday 28 September 2009
High Street bellwether Marks & Spencer promises to hog the headlines with a second-quarter trading update, due on Wednesday.
Bank of America-Merrill Lynch, forecasts a 2 per cent rise in sales at the retailer, with UK sales up 1 per cent. It also expects to hear of market share gains in clothing, as the improved product offer and what Merrill terms a "well-targeted marketing spend" begin to pay off. "We think M&S's Portfolio brand has performed very well, Per Una is now in better shape and we expect [the group] to benefit from a more balanced price architecture, and from a gradual improvement in older shoppers' consumer confidence."
Analysts also expect some good news about M&S's gross margins, with Deutsche Bank saying the retailer is on track to deliver a much smaller gross margin decline (minus 70 basis points) this year than its current guidance (minus 125 to minus 175 basis points). "We expect management to change this guidance," Deutsche added, saying that it expected the revision to come either this Wednesday or in early November, when M&S posts its half-year results.
Today: This morning's final results from the building materials company Wolseley should hold no surprises, according to Panmure Gordon. Any strategy-related comments from Ian Meakins, appointed to the board as chief executive in July, are likely to be in focus, the broker said, retaining its "sell" stance on the group's shares.
Results/updates: Origin Enterprises and Wolseley.
TOMORROW: The newspaper group Daily Mail & General Trust's pre-close trading update should show some easing in the rate of decline in advertising, albeit largely owing to improved comparatives, predicts Deutsche Bank. "The balance of risks with DMGT is, in our view, now the reverse of recent patterns and against the recent case for owning the stock – that is, we now see more upside risks to newspaper forecasts but see more downside risks in [the] non-newspapers [business]," the broker said. "In sentiment terms, downgrades to non-newspapers, even if offset in newspapers, might be negatively received."
Also tomorrow, Numis expects news of £100m in pre-tax profits and 54.2p in underlying earnings per share when Close Brothers posts preliminary results. Numis said however that there could be some upside to these numbers: the banking impairment rate may turn out lower than the 2.9 per cent forecast, and the Winterflood business "appears to have experienced another record half year in trading volumes," the broker said.
It added that any upgrade to the future forecasts will depend on how reassuring the company is that impairment is now at a peak, whether Winterflood volumes can be sustained, the continued performance of the asset management division, and lastly the completion of rumoured corporate transactions, if they are earnings enhancing.
Results/updates: Diary Crest, Future, Compass, TUI Travel, Close Brothers and Daily Mail & General Trust.
WEDNESDAy: The software group Misys is due to post an interim management statement. While it is likely to evidence continued weakness in initial license fee sales, the outlook should be positive, according to Panmure Gordon, which expects the company to confirm estimates for the current year.
"Misys is likely to suggest that, whilst trading remains tough, it has seen a recent improvement in the sales pipeline at its treasury and capital markets and banking divisions," the broker said. "The turnaround has been dramatic ... and Misys is configured to deliver a positive earnings surprise in an improving [macroeconomic] environment, yet operationally the short term remains uncertain and Bankfusion delivery is dragging."
Results/updates: Motivcom, Thomas Cook, Man, Smiths Group, Misys and Marks & Spencer.
THURSDAy: Numis expects a strong update from Domino's Pizza UK & Ireland, which is due to post a third-quarter interim management statement. Like-for-like sales (up 7 per cent in the first half) and margins are likely to remain resilient. "The risk to forecasts for 2009 should be on the upside, given that they assume just 5 per cent like-for-like sales growth and a 90 basis point margin reduction in the second half," the broker said.
"At present, we are forecasting 16 per cent earnings per share growth in 2009, but believe around 25 per cent growth could be achievable."
Results/updates: Trading Emissions and Domino's Pizza UK & Ireland.
FRIDAY: Results/updates – Helphire.
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