The Week Ahead: Figures due from Marks & Spencer, Morrisons, Halfords, ABF and Aviva
The turnaround plans of Marks & Spencer and Morrisons will be in the spotlight when the retailers post updates during a busy week for corporate news.
Marks & Spencer is set to unveil its ninth consecutive quarter of falling clothing sales on Tuesday heaping more pressure on chief executive Marc Bolland.
The retailer is attempting to revive flagging general merchandise sales, which span clothing and homewares, with a star-studded advertising campaign featuring Dame Helen Mirren and Olympic boxer Nicola Adams.
But analysts believe the campaign will have had little impact on sales in the July to September quarter, while the mild autumn could also dent trading, as on average they predict a fall of 1.5% for like-for-like general merchandise sales. That would follow a 1.6% fall in its first quarter to the end of June, when M&S said it was battling intense discounting.
Its “Leading Ladies” campaign features a dozen high-profile women at locations including a boat on the River Thames and a country house in Berkshire, wearing dinner dresses, leather jackets, faux furs and stiletto heels from the ranges. But while the chain’s new autumn/winter collection began arriving in stores from July, the print, billboard and online campaign was only formally launched at the start of September.
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The City expects pre-tax profits of £262million for the six months to the end of September, a 9.5% deterioration on £289.5m a year earlier.
Credit Suisse analysts said while the autumn/winter ranges show “some signs of improvement”, they will not be enough to transform underlying sales or margins. Deutsche analysts now expect a 2% decline during its second quarter, compared with a previous forecast for flat sales.
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However, the chain’s clothing performance will contrast with its food business, which is expected to serve up a 3% gain in underlying sales. Analysts at Shore Capital said: “We are nervous about the performance of the UK apparel business despite the high profile launch of the autumn/winter ranges due to the mild weather.”
Budget retail chain Primark will cap off another impressive year when parent Associated British Foods reports on Tuesday after shrugging off volatile weather conditions.
The hot summer weather helped Primark overcome chillier conditions in the spring that had led to subdued sales growth, with the retailer expecting full-year like-for-like revenues to rise by close to 5%. Its profit margins were also given a boost as the fashion firm was left marking down less stock due to strong summer trading.
Primark’s robust fourth quarter performance saw ABF lift expectations for second half earnings. Analysts are now pencilling in a 3% rise in underlying pre-tax profits to around £1.1billion for the year to September 14, although this would come as a marked slowdown on the 25% increase seen in the half year, when Primark’s comparable store sales surged by 7%.
Elsewhere in the ABF business, its sugar division has seen earnings hit by losses in China, while trading has been more robust in the agriculture and ingredients divisions.
In grocery, which includes Twinings, Ryvita and Jordans cereals, underlying earnings are set show a “substantial improvement”, according to a recent update by ABF.
Supermarket Morrisons is set to reveal further sales pressure in its third quarter on Thursday as its turnaround makes slow progress in luring in hard-pressed shoppers.
Retail analysts expect the fourth biggest grocery chain to report another quarter of declining like-for-like sales, down as much as 1.8% after a 1.4% slump in its first three months, according to Santander expert Tim Attenborough.
Recent market share figures showed Morrisons suffered a drop in market share to 11.2% in the 12 weeks to October 13 from 11.4% a year earlier. But it was not the only group seeing its share fall back, with discounters Aldi and Lidl, Sainbury’s and Waitrose among the only winners.
Morrisons said on posting a 22% dive in half-year profits that its customers were struggling under relentless pressure from stubbornly high inflation and poor wage growth.
Chief executive Dalton Philips is hoping a recovery plan will start to bear fruit as the group expands its network of convenience stores from 33 to around 100 by the end of its year, while it is also on track to start selling food online, through a tie-up with internet grocer Ocado, by the end of January.
Analysts at Oriel Securities said: “The stores are starting to look better and we expect extended opening hours to aid a return to the black in the fourth quarter, especially given how poor Morrisons’ marketing was last year. It’s not out of the woods yet but there are some green shoots.”
Car parts and bicycle business Halfords should report its fifth quarter of retail sales growth in a row on Thursday as Britain’s renewed interest in cycling shows no sign of abating.
The group is set to follow an impressive first quarter, when retail sales leapt 8.8% higher, with further growth despite tough comparisons amid the Olympics a year earlier.
Halfords was boosted by a 15.5% jump in cycle sales in the first quarter, with brands endorsed by cycling heroes Chris Boardman and Victoria Pendleton contributing towards the improvement. Analysts at Investec expect sales growth to slow marginally in the second quarter, leaving overall first half like-for-like retail sales 5.4% higher.
Half-year profits are predicted by most experts to fall around 9% to £38.3m, but this would be an improvement on the 23% decline seen a year earlier and 22% fall seen in its recent full-year results.
Andrew Fitchie at Investec said: “Despite last year’s tough sporting comparatives, we expect continued interest in cycling and the sunshine to have positively influenced both cycling and travel categories in the first half.”
Away from retailing, insurance giant Aviva is likely to reveal the impact of the St Jude’s storm on its finances when it updates on recent trading on Thursday.
The life and general insurer is set to report on the three months to the end of September, but could also give an early estimate of claims from the worst storm to hit Britain in several years.
While fellow insurer AA has said the size of claims has been smaller than previous major storms, the sector has been hit by a barrage of claims for damaged cars, lost tiles and fallen walls after winds of up to 99 miles per hour lashed southern England and Wales.
Aviva is also expected to report more progress with its turnaround plan, which aims to save £400m. In April it revealed plans to axe around 2,000 jobs, equivalent to 6% of its global workforce, and it could reveal scope for more savings as it expands digitally and through automation.