The Week Ahead: Updates due from HSBC, Sainsbury’s and Home Retail Group

The head office of HSBC at Canary Wharf, London.

The head office of HSBC at Canary Wharf, London. - Credit: AP

Thousands of expected job cuts at HSBC and more falling sales at Sainsbury’s are among the major City updates lined up for the coming week.

Details of up to 20,000 job cuts are expected to be announced on Tuesday when HSBC boss Stuart Gulliver unveils his keenly-awaited strategy update for the banking giant.

Mr Gulliver is reportedly preparing to deliver the blow to the group’s global workforce at the investor event in an attempt to reassure shareholders that management focus on cutting costs remains undiminished after a series of recent scandals.

It is thought the plans could impact between 10,000 and 20,000 roles at the bank, with its investment banking arm potentially among parts of the business in the firing line. HSBC has 48,000 of its 257,000 staff in the UK.

The bank is also likely to be scrutinised over underperforming parts of the business, such as the United States, Mexico, Brazil and Turkey.

The update comes with HSBC also in the spotlight after being hit with a 40million Swiss francs (£28m) fine to settle an investigation by prosecutors in Geneva into alleged aggravated money laundering.

The investigation came about after an ex-employee leaked a list of thousands of suspected tax evaders to French authorities in 2008. But the penalty is expected to draw a line under the affair, with HSBC saying the probe had found neither it nor its employees were suspected “of any current criminal offences” and that it would not face criminal charges.

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As well as his plans for cost cutting, Mr Gulliver is also likely to be quizzed on the bank’s review into whether to relocate its headquarters.

HSBC recently announced it was considering moving out of the UK in the wake of “regulatory and structural reforms” in the industry following the financial crisis. These include the need to separate its investment banking arm from the retail division serving ordinary customers and businesses.

The head office of the UK retail bank is being relocated from London to Birmingham by 2019 amid the “ringfencing” rules and HSBC is said to be considering a sale of the business, which was known as the Midland before being bought by HSBC in 1992.

Sainsbury’s is expected to report a sixth successive quarter of falling like-for-like sales when it delivers its latest trading statement on Wednesday.

It remains under pressure with Britain’s big four grocers, which also include Tesco, Morrisons and US-owned Asda, engaged in fierce competition as they scramble for market share, which is being eaten away by discounters Aldi and Lidl.

Brokers at Jefferies expect Sainsbury’s to report first-quarter like-for-like sales down 1.8%, following a fall of 1.9% in the previous period.

Latest industry data from Kantar Worldpanel for the 12 weeks to May 24 found Sainsbury’s sales fell 0.3% but that it kept its market share at 16.5%.

Last month Sainsbury’s registered its first annual loss in a decade, falling into the red by £72m after writing down £628m on the value of its property estate.

Sainsbury’s recently saw the first of two Argos concessions opened at stores in Surrey and Cheshire. It has said that a quarter of its stores have under-used space and over the next five years this will be used for concession partnerships and to expand its non-food offer.

Argos owner Home Retail Group is expected to report a fall in sales for the retailer in a trading update on Thursday as it battles to transform itself for the digital age. The brand’s 755 stores are two years into a five-year revamp, introducing newly-designed stores and iPads for ordering products instead of catalogues.

But chief executive John Walden has admitted that customers have experienced delays and disruption while its technology has struggled to cope at times of “extreme” online demand.

The group also owns DIY chain Homebase and said last October it would close a quarter of its 323 home improvement stores, about 80 outlets, by early 2018.

Brokers at Nomura expects Argos to turn in a like-for-like sales fall of 4%, compared to a 0.1% rise in the previous quarter, due to a weak electricals market and service disruptions as it converts its stores.

Nomura forecasts Homebase to post a same store sales fall of 1%, compared a 0.6% rise in the previous quarter, against the tough comparison with the same a period a year ago when good spring weather boosted seasonal promotions.

In April annual results showed the wider group grew benchmark pre-tax profits, stripping out one-off items and other costs, by 14% to £132.1m, with operating profits for Argos up 15% to £129.2m and for Homebase up 5% to £19.8m.

But chief executive John Walden admitted that the plan to transform Argos had “not unfolded exactly as we originally envisioned”.

Analysts at Nomura added that now Argos has most of its new infrastructure in place “the year ahead is key for the Argos transformation.”

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