The Week Ahead: Updates due from Greene King, Tesco, Mulberry and Park Group
- Credit: Archant
Half-year results from pubs and brewing group Greene King, the latest trading update from supermarket giant Tesco and interim figures of up-market handbag maker Mulberry will all be closely watched in the coming week.
Greene King is expected to report a robust first half following the summer heatwave, with consumers continuing to eat and drink out despite the squeeze on personal finances.
The firm, whose brands include Hungry Horse and Loch Fyne as well as beers such as Old Speckled Hen and Abbot Ale, saw sales growth pick up pace in its core retail estate of 1,000 managed pubs during the first 18 weeks of its financial year, to 4.6% from 2.3% in the previous year.
Analysts at Deutsche Bank predict the sales momentum will have been maintained throughout the first half, pencilling in a rise of around 4% when the group reports tomorrow, and they believe interim underlying pre-tax profits will rise by 8% to £31m.
Greene King is also likely to benefit from a rise in sales and profits in its brewing arm after it bucked the traditional summer trend away from real ale, with sales volumes of Old Speckled Hen up 7.8% in the first 18 weeks.
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Also reporting interim results tomorrow is gift voucher firm Park Group, which recently revealed that orders for its Christmas savings business were around 2% lower amid ongoing pressure on consumers.
The market will be looking for signs of a pick up since September, with the final quarter of its financial year the most critical for the group which offers Christmas vouchers, hampers and other gift products in a 45-week instalment plan.
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In-house broker Arden Partners said Park has been suffering from the collapse of a number of retail partners in recent years, including JJB, Comet and HMV.
But Park has been growing its online business by allowing customers to buy vouchers and pre-paid cards, while it also now has more than 6,000 corporate customers.
Another burgeoning area is its Flexecash initiative, allowing corporate customers or consumers to load money on to a gift card and choose where it can be spent.
Launched in 2010, it is now far bigger than the group’s original hamper product, which was launched with the company in 1967. But just over half of all group revenues come from its consumer arm, of which its Christmas savings business is still a major part, according to Arden.
Tomorrow’s half-year figures are expected to show traditional seasonal losses, as more than three quarters of revenues come in the second half.
It narrowed pre-tax losses by 6% to £4.1m at last year’s interim stage and Arden is expecting Park to report a 3% rise in full-year underlying pre-tax profits to £10.1m.
Tesco boss Philip Clarke’s turnaround plans will come under fresh scrutiny on Wednesday when the compaony is expected to reveal a renewed fall in UK sales.
Analysts are predicting like-for-like sales to have dropped by around 1.5% in its third quarter, marking a setback for the group after it managed to halt declines in the previous three months, when sales remained flat.
Its own brokers, Deutsche Bank, have raised the alarm over recent trading and cut forecasts for annual underlying earnings.
Mr Clarke will face tough questions over his £1billion plan to reinvigorate trading as the group enters its peak Christmas trading period.
Some major investors have already reportedly raised concerns over the chain’s management team following a dire set of first half figures. Tesco’s interim profits tumbled by almost a quarter to £1.39 billion after underlying sales declines in the UK and every one of its overseas markets.
The group insisted its turnaround efforts were paying off with an improved performance in the UK, where trading profits rose 1.5% to £1.13bn in the six months to August 24, but the focus fell on steep profit declines at its European and Asian businesses, once the driving force behind growth. Signs of a relapse in the UK will add to its woes.
Deutsche Bank is pencilling in a 1.5% fall in UK sales and now believes group underlying earnings over the current financial year will fall 3% to £3.35million.
Shore Capital is also estimating a decline of between 1% to 2% in what they predict will be a “subdued” update, although they say all of the “big four” chains have been squeezed in recent weeks by a shift among shoppers from middle-market retailers to discounters such as Aldi and Lidl, as well as premium players Marks & Spencer and Waitrose.
According to data from Kantar Worldpanel, Tesco, Asda, Sainsbury’s and Morrisons saw their market share drop year-on-year in the 12 weeks to November 10.
Tesco has been stepping up its money-off vouchers in recent weeks to boost trade and joining rivals in launching extensive TV advertising campaigns in what is shaping up to be another fiercely competitive Christmas in the sector.
First half figures from Mulberry on Thursday will be looked to for signs of improvement as the group seeks to recover from plunging annual profits and falling sales.
The firm was left nursing a slump in full-year profits of more than a quarter to £26m after spending heavily on overseas expansion, while a 16% slide in wholesale revenues wiped out a 6% sales rise in its own stores.
It was rocked further after the resignation of creative director Emma Hill, who is credited with the transformation that has seen Mulberry become a celebrity must-have brand.
But there were signs of progress as the firm said retail like-for-like sales had risen by 6% in the first 10 weeks of the new financial year, while it hoped to halt wholesale declines with “modest” growth over the year as a whole.
Mulberry chief executive Bruno Guillon is also putting faith in his international expansion plans and looking to the United States and Asia to offset tough economic conditions in Europe, but a slowdown in consumer demand across emerging markets may dampen the group’s prospects in Asia.
Barclays analysts said after Mulberry’s full-year figures in June that Mulberry needed to provide “more evidence to reflect the global growth story”. But they added: “Our belief that Mulberry can move from a domestic UK brand to a global brand remains high, providing significant long-term growth potential.”
Strong demand for the likes of the Alexa and Del Rey designer bags have in recent years turned the Somerset-based firm from a trusted briefcase and wallet maker into an international fashion powerhouse. It recently completed the construction of a second Somerset factory, doubling UK production capacity to keep up with demand, while it has also overhauled its distribution network, which promises to get wholesale turnover back on track.