The Week Ahead: Figures due from Tesco, AO World, Bellway and Wolseley

Tesco boss Philip Clarke will come under renewed pressure on Wednesday when Britain’s biggest supermarket is expected to post a worsening decline in sales.

Analysts believe the latest disappointing trading figures will cast further doubt over a £1billion turnaround plan unveiled by Mr Clarke two years ago.

Analysts at Barclays expect like-for-like sales will be down 4.1% in the first quarter of the new financial year, an acceleration on the 2.9% slide the retailer posted in the fourth quarter of the 2013/14 financial year.

Annual results published in April showed underlying pre-tax profits fell 6.9% to £3.05bn in the year to February 22, the group’s second annual decline in a row.

Analysts expect a further deterioration for the current 12-month period, meaning the group is facing the unwelcome prospect of a hat-trick of yearly profit falls.

Mr Clarke’s turnaround plan was launched in 2012 after the supermarket issued its first profits warning in two decades. His plans included a £500million “refresh” programme to upgrade stores.

Tesco and its “big four” rivals Asda, Sainsbury’s and Morrisons are facing an increasing threat from discounters Aldi and Lidl gnawing away at their market share. Mr Clarke said earlier this year that Tesco would invest £200m to cut the price of staples such as butter, milk and eggs.

Analysts at Shore Capital argue the pain at Tesco should be easing instead of getting worse, pointing out that the store upgrade programme is more than a year old and should be having a positive effect on sales, as should improvements to its bakeries and ‘Everyday Value’ and ‘Finest’ ranges. They estimate Tesco will suffer a 3.5% like-for-like sales fall in the UK, adding that the strategy “simply just does not seem to be working.”

Cantor Fitzgerald analyst Mike Dennis expects a 3.7% slump. He said: “The UK market is polarising faster between budget brands and premium ones. It seems Tesco is stuck in the middle and investors could be questioning management’s strategy.”

Online appliances retailer AO World reports its maiden set of annual results as a listed company on Thursday following a period in which its share price has fallen steeply since it floated on the stock market in February.

AO appears to have been hit by the dwindling investor appetite for newly-listed firms which recently saw over-50s focused holidays-to-insurance firm Saga come to the market at the bottom of its expected price range, while fashion retailer FatFace shelved float plans.

Shares in AO, whose site sells appliances such as washing machines, tumble dryers, dishwashers, fridges and cookers, were initially offered at 285p but have since fallen by as much as a quarter.

AO has recently begun selling televisions in a bid to take advantage of this year’s World Cup in Brazil and take a slice of a UK TV market worth £4.3bn a year. There are also plans to enter the £6.6bn German appliance market next year.

JP Morgan Cazenove is confident about AO’s chances in Germany. The broker said: “AO has built its business model with scale in mind, and both the website and systems should therefore be easily transferable into Germany.”

Other analysts are also bullish about the prospects of the business, which was founded 14 years ago by kitchen appliances executive John Roberts.

Analysts at Numis expect annual sales to have picked up by 40% to £386.6m and, though forecasting a 6% fall in pre-tax profits to £8.2m, they predict this figure will nearly triple in the next couple of years.

Investors will look to housebuilder Bellway to capitalise on the strong start it made in the first half of the year when it posts its third quarter trading statement on Thursday.

At its interim results for the six months to January 31, the company produced a 40% rise in sales to £701.1m and a record first-half operating profit up 69.6% to £109.2m. During that period it sold 3,245 homes, up 25% at an average selling price of £212,071.

Bellway, like other housebuilders, has been boosted by the Government’s Help to Buy scheme, which was extended in March for another four years until 2020.

Analysts at Numis expect the flow of good news to continue from the housebuilder next week. The broker said: “We expect a strong update from Bellway, which should confirm that the group is fully sold for the year and has secured its target of achieving 20% volume growth this year.”

Bellway made this pledge when it released it half year results in March, and also disclosed that its order book had grown 65% in value over the year to £829.5m, representing 3,944 homes.

Not surprisingly the engine of the group’s growth has been London and the south, where its eight divisions showed growth of 65% at the half year, against 58% growth at the same period a year ago. Bellway said that in the south not only are selling prices higher, but it uses fewer promotions to sell homes.

Plumb Center and Pipe Center owner Wolseley will reveal the extent to which the harsh winter in the United States has dented sales when it publishes a third quarter trading statement on Tuesday.

The building materials group generates 53% of its sales in the United States. Analysts at Panmure Gordon estimate that third quarter sales will come in at £3.1bn, a rise of 2% on an organic basis, but that trading profit will have slipped 1.4% to £148m from a year ago. Panmure puts the slide down to the effect of changing foreign profits back into a strong pound as well as the cold winter in America.

At the half year stage the group said its US arm had grown like-for-like sales by 6.2%, while the UK market improved like-for-like sales by 3.2%. Wolseley chief executive Ian Meakins said at the time he expected the group’s like-for-like revenue growth rate for the remainder of the year to be about 4%.

Numis expects growth to continue in the UK, where Wolseley generates 15% of sales, but that continental European markets will continue to be subdued. However, the broker wonders whether Wolseley can keep to its 4% guidance in the second half of the year.