The Week Ahead: Figures due from Sainsbury’s, Morrisons and HSBC

Sainsbury's chief executive Mike Coupe.
Photo: Sainsbury's/PA Wire

Sainsbury's chief executive Mike Coupe. Photo: Sainsbury's/PA Wire - Credit: PA

The City will this week look for details of how Sainsbury’s plans to overhaul Argos when the supermarket posts its annual results next week, while trading at rival Morrisons and banking giant HSBC will also be in the spotlight.

Sainsbury’s posts full-year results on Wednesday after a eventful year that has seen the group return to sales growth and win a lengthy battle to take over Argos owner Home Retail Group in a transformational deal.

The Big Four grocer won a four-month takeover tussle in early April to snap up Home Retail for £1.4billion, a move the group said will create the UK’s largest non-food store – a £6bn giant with around 2,000 stores, concessions and click-and-collect outlets.

It is a daring move for boss Mike Coupe, who took over from predecessor Justin King in July 2014, but it is hoped the might of Argos will help Sainsbury’s see off the mounting threat from online retailer Amazon and German rivals Aldi and Lidl.

Full-year figures from Sainsbury’s will show the impact of another tough year for the supermarket sector, with analysts pencilling in a 16% fall in underlying profits to £574million.

But Mr Coupe has made recent inroads into shoring up trading, with the group posting its first quarterly like-for-like sales growth for more than two years in March when it said like-for-like retail sales excluding fuel lifted by 0.1% in the fourth quarter, compared with a fall of 0.4% in the third.

The most recent industry data also shows Sainsbury’s to have notched up the highest sales growth of the Big Four. Figures from Kantar Worldpanel showed 1.2% sales growth for the chain in the 12 weeks to March 27, despite its decision in February to end multi-buy and buy-one-get-one-free promotions. The group also recently said it would end its Brand Match pricing strategy in favour of lower regular prices on key products.

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Analysts at Barclays said they will be looking for comments in the full-year results about the cost of recent price moves.

They said: “The company has repeatedly stated its determination to remain competitive on price in the market - and any sense of how expensive this may prove will be crucial.”

Morrisons will also provide its latest snapshot of trading when it updates on Thursday. The group is likewise seeing a resurgent performance, revealing in March that it bounced back into profit after posting its first quarterly sales growth for four years.

It reported a pre-tax profit of £217m for the year to the end of January, compared with a £792m loss the previous year after it made large writedowns across the value of its store estate. The group also revealed a 0.1% rise in like-for-like sales for the fourth quarter of the year, its first quarterly rise since 2012.

Clive Black, retail analyst at Shore Capital, said Morrisons is likely to show a continuation of the improving underlying sales momentum shown in its fourth quarter, although ongoing price deflation could see the same-store sales figure brought down to zero.

Morrisons chief executive David Potts, who took over from the ousted Dalton Philips almost a year ago, has made a number of changes as he bids to turn around the firm’s fortunes including a landmark deal last month with US online giant Amazon to supply fresh food to its customers.

HSBC is expected to post a sharp fall in profits, as regulatory charges and lower investment banking revenues continue to dog the sector.

The City expects the lender to post a first-quarter pre-tax profit of 4.3bn US dollars (£2.9bn), a 39% fall from a year ago, due to a fall in investment banking work across the industry.

Analysts at Goldman Sachs said “the bulk” of the fall in profit at HSBC would come from “a steep fall in the investment banking space”.

Earlier this month Barclays saw profits tumble by a quarter in the first three months of the year to £793m after it was hit by tough trading in its investment banking arm.

HSBC management comfortably survived a shareholder vote over executive pay earlier this month, which passed a pay package of £7.3m for chief executive Stuart Gulliver.

The banking giant saw 90.5% voting in favour of the firm’s remuneration report, which also included a pay deal for chairman Douglas Flint worth £2.49m for 2015.

However, the lender said it would take steps to review pay packages for executive directors following concerns from shareholders.

HSBC saw annual pre-tax profits rise 1% to 18.9bn US dollars (£13.2bn) when it announced its annual results in February, but fell short of analyst expectations of 21.8bn dollars (£15.2bn). The bank, which gets a large slice of its profits from Asia, blamed “seismic shifts” in the global economy, triggered by a sharp drop in oil prices, slowing economic growth in China and low interest rates in developed economies.

Amid a busy period for the bank, Mr Flint announced in March that the hunt had begun for his successor, who will also take charge of finding a new chief executive to replace Mr Gulliver.

After a lengthy review, HSBC announced in February it will keep its headquarters in the UK, although it warned that the bank would move about 1,000 jobs from London to Paris in the event of Britain leaving the European Union.