The Week Ahead: Figures due from Whitbread, TUI Travel, Carpetright and Sports Direct International
- Credit: PA
Coffee shop chain Costa is expected to deliver another caffeine kick to parent group Whibread when its reports on recent trading this week while figures are also due from TUI Travel, Carpetright and Sports Direct International.
Costa is expected to maintain its lengthy run of sales growth when Whibread issues a third quarter update on Tuesday as it benefits from an aggressive expansion drive, which has seen it grow to more than 1,600 coffee shops in the UK and 1,000 overseas. It recently swelled half-year profits by more than a fifth to £43.5million.
Together with a robust performance from budget hotel business Premier Inn, it helped Whitbread post a rise in half-year underlying profits of 12.6% to £216.1m. Analysts at Numis Securities are expecting a rise in group like-for-like sales growth in the third quarter to 3.5% from 2.8% in the half year.
Costa suffered a slowdown in sales during the summer heatwave and as it came up against tough comparison with the Olympics a year earlier, but has since benefited from a rebound in demand.
Numis is pencilling in a 3.5% sales rise for the chain in the quarter, while autumn is set to have been strong for Premier as well as it also benefits from the economic recovery.
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“With the UK economy apparently in recovery mode and around 60% of Premier Inn’s customers being business-related, we believe that there may be scope for forecast upgrades Costa,” said Numis.
Whitbread is also expanding its Premier arm, extending its target for new rooms to 75,000 by 2018 from an original aim for an extra 65,000 by 2016.
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The company expects to open around 4,000 new Premier Inn rooms in the current financial year and a further 4,500 in 2014/15.
Profits are set to soar to new heights for tour operator TUI Travel when it posts annual results on Tuesday. The Thomson and First Choice parent has already guided the market towards an underlying earnings increase of at least 11% after seeing revenues boosted by higher bookings and average prices.
But the group’s tax bill may come under the spotlight again after it revealed last year that it paid no UK corporation tax despite posting record annual results. Underlying pre-tax profits leapt 8% to £390million last year, but it came under pressure after admitting its UK corporation tax bill was zero as a result of losses incurred following a restructuring launched five years ago. It said it would start paying tax again once those losses had been carried forward and that it was paying the “right amount” of Corporation Tax’ in the countries in which it operates.
TUI has been benefiting from its overhaul, as well as the return of consumer confidence, which saw summer and winter bookings rise this year.It experienced some slowdown in the summer heatwave as some Britons opted to holiday at home, but annual figures will show a solid year, according to Numis Securities.
Numis analyst Wyn Ellis is forecasting an 18% rise in underlying earnings to £580m, while most analysts are expecting underlying pre-tax profits to improve 16% to £452m. He said: “In the UK, given improving consumer confidence, rising house prices, economic growth and increasing employment, we believe that the trading outlook for next summer is increasingly positive.”
But rival Thomas Cook recently flagged up the impact of travel restrictions amid the political unrest in Egypt, a popular winter destination, which it said cost it around £40m in full-year revenues and £10m in earnings. This could also hit TUI’s current quarter trading, according to Numis.
Also on Tuesday, Carpetright founder Lord Harris of Peckham will present his first set of results since making his dramatic return to day-to-day running of the firm.
Lord Harris replaced former chief executive Darren Shapland at the helm in October in the wake of a shock profits warning and sliding sales. The dismal trading update dashed hopes of a boost from Britain’s property market recovery, although the market will be watching for any signs of an upturn in the half-year results as the housing boom continues.
Flooring firm Topps Tiles reported its first growth in annual profits for six years last month and a 7.4% surge in sales since the year-end, giving hope that conditions are finally improving in the sector as the economic recovery picks up pace.
Carpetright saw sales drop 2.5% in the 10 weeks to September 29 and cautioned over volatile conditions in the UK, with trading in its Netherlands chain “extremely difficult”. Until recently, like-for-like sales were on a positive trend, with annual profits more than double the previous year at £9.7m.
But analysts are now expecting the profits rebound to grind to a halt in the current year, with forecasts for annual pre-tax profits to remain flat.
Lord Harris, who was formerly non-executive chairman, founded the business in 1988 with a single outlet in Canning Town, east London, and it was floated on the London Stock Exchange five years later. It now trades from 616 stores, including 474 in the UK and 95 in the Netherlands.
Mike Ashley’s retail empire Sports Direct International is likely to continue its strong run in Thursday’s half-year results after solid summer sales despite tough comparisons from last year’s London Olympics. The sportswear chain, which is controlled by the Newcastle United FC owner, is expected to report another impressive rise in earnings.
Numis Securities is pencilling in an 18% rise in underlying earnings to around £180 million for the first half, after staff bonus payments.
This would put Sports Direct firmly on track for its full-year targets under the employee bonus scheme, which recently rewarded around 2,000 staff with shares worth more than £68,000. The lucrative incentive programme is said to be a factor behind its recent success, as well as the demise of rival JJB Sports and a recovering retail sector.
Sports Direct saw a resilient performance in the summer, with sales up 15.1% to £463.7m in the nine weeks to September 29, down only marginally on the 18.2% growth reported in the first quarter. The figures were also boosted by a 75% jump in sales of its smaller premium lifestyle unit, helped by the impact of fashion retailer Republic, which it bought in February.
Citi analysts said in a recent note that the group’s strong sales pattern, weak competition from rivals and the Brazil World Cup in 2014 make its 15% target for annual earnings growth “increasingly plausible”.
Sports Direct was promo-ted to the FTSE 100 index in September following a 70% leap in its share price. It has around 400 stores across the UK and also operates in 19 European countries, including Belgium, Austria, Slovenia, Portugal and France.