The Week Ahead: Figures due from Morrisons, Next, Dixons Carphone and Home Retail Group
- Credit: PA
Troubled supermarket Morrisons will this week unveil half-year results for the first time under new boss David Potts on a “super Thursday” for the retail sector which will also see the latest figures from Next, Dixons Carphone and Argos owner Home Retail Group.
Morrisons is expected to post another slump in half-year profits, leaving investors keen to hear the turnaround plans of Mr Potts as he presents his first set of results to the City.
Brokers at Barclays expect the chain to post a 2.5% fall in half-year like-for-like sales, and a 23% fall in earnings to £203million compared to a year ago.
Mr Potts took over as chief executive in March from Dalton Philips who was ousted 12 months after the announcement of a three-year £1billion programme to cut prices to fight the supermarket price war.
This battle has seen discounters such as Aldi and Lidl take market share from the Big Four major players, Tesco, Sainsbury’s, Asda and Morrisons.
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Mr Potts signalled his intention to get back to basics when he said in April he would cut 720 staff at Morrisons’ head office, as it recruits 5,000 more shop floor workers to improve service levels.
He said he wanted the business to focus more on things that “matter to customers” such as product availability and helping shoppers at checkouts.
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Brokers at Barclays said: “We expect Mr Potts to be very focused on the retail basics, which will likely involve investment in price, quality and service. While this may be the right way forward, we are wary of the profit impact.”
Fashion retailer Next is expected to see a rise in half-year profits after enjoying spells of warm weather over the summer months
The group said full-price sales for the six months to July 25 were up 3.5%, picking up from first-quarter growth of 3.2%. It added that the half-year figure just beat the top end of the firm’s guidance for growth of 3%.
Brokers at Numis expect the firm to turn in pre-tax profits up 5.8% to £343m for the period, benefitting from sunshine in June and July.
The retailer said in an update last month that of its 3.5% sales improvement, 1.7% came from the opening of “profitable new space’’. It said that store sales rose 0.8% in the period, while its Next Directory catalogue and online sales lifted 7.5%.
Next also said that stock at its end-of-season sale was 4.8% higher than a year ago, adding that although clearance rates were lower than 12 months ago they were in line with internal forecasts.
The retailer commented that its weekly sales figures throughout the period, demonstrated “the continued volatility of consumer demand”.
It lifted its mid-point profit forecast for the full year from £810m to £825m, a rise of 5.5% on the prior year. It also lifted its prediction for sales growth for the year to a range from 3.5% to 6%.
Next said the increase in the sales target was a result of what had been achieved in the first half of the year with no change to the forecast for the second half.
Electricals and mobile phones giant Dixons Carphone is expected to grow first quarter sales again following a “terrific” full year.
Brokers at Bank of America Merrill Lynch expect the firm behind Carphone Warehouse and Currys PC World to report group like-for-like sales up 3.5% , driven by UK same store sales up 5%.
They expect the group’s UK shops to continue to benefit from its increasing share of the contract mobile phone market, which is seeing user revenues rise. The UK accounts for around 70% of group sales.
However, trading growth is expected to ease compared to the previous quarter which saw same store sales jump 13%, as the business built on momentum seen in Christmas trading.
Trading in the first quarter a year ago saw the business post 4% like-for-like sales growth in the UK, buoyed by an increasing demand for TVs ahead of the World Cup last summer.
Brokers at Numis said: “We expect trading momentum to ease in the first quarter but for like-for-like sales to remain slightly positive in all regions.”
Home Retail Group is expected to report another tough period of trading for Argos as it continues to revamp its stores providing customers with iPads to order products instead of catalogues.
City analysts expect sales at Argos, which has 788 shops, to report a like-for-like sales fall of 1.8%, following 3.9% slide in the previous quarter to May 30 as a rise in sales of mobile phones failed to offset a decline in electrical goods.
Brokers at Nomura said in the second quarter sales at Argos should be helped by an improving electricals market and increasing public awareness of the “vast changes in the business.”
Sales at Homebase, also owned by Home Retail Group, are forecast to have climbed by 4.1% according to a consensus of City analysts, slower than the previous quarter’s 5.4% rise.