The Week Ahead: Updates due from John Lewis, Next, Kingfisher, Home Retail Group and Barratt
A BIG week for the retail sector sees results for department store chain John Lewis, B&Q parent Kingfisher, chocolatier Thorntons and clothing giant Next.
Next will report robust profit growth in its half year results on Thursday as new stores and strong online sales continue to boost the high street giant.
The fashion and homewares chain, which has around 540 stores, is forecast by brokers Numis Securities to report a 7% increase in pre-tax profits in the 26 weeks to July 28 to �244 million.
The group saw total sales rise 4.5% in the period, with a significant improvement in the second quarter, as outlet sales edged 0.2% ahead and online Next Directory surged 13.3%.
Matthew Taylor, analyst at Numis Securities, said: “There may have been some benefit from Next’s position as official clothing supplier to London 2012, with Team GB items prominently displayed in stores, the main source of the trading uptick.”
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Next, which has been helped by new space offsetting lower sales from shops open more than a year, recently lifted its full-year profit hopes.
The group, which saw its share price climb 25% in the reporting period, expects earnings of between �575 million and �620 million for the year to January 31, up from an earlier forecast of between �560 million and �610 million.
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Prices have been flat in the last year and the company has previously said it does not expect to see any significant price pressures ahead.
The womenswear market had been tougher in the period, which has been the case throughout the industry, while the retailer was also affected by the record rainfall throughout June.
However, recent improvements in the weather are likely to have boosted current trading.
Shares in Home Retail Group have jumped 30% since a surprise update showed better-than-expected trading at catalogue business Argos.
Underlying sales declined by 0.2% in the three months to June 2, which marked a significant improvement on the 8.7% drop in the previous six months, helped by the launch of Apple’s iPad 3 tablet computer.
The City expects sales figures for its second quarter to provide further cheer on Thursday, with analysts pencilling in a 0.7% fall, which would be much better than the 9.6% drop seen a year ago.
The chain, which has some 750 stores, is looking to recover from months of dire trading, which prompted Home Retail to axe its dividend pay-out.
Investec analyst David Jeary said: “We believe that fears on Argos should be alleviated, if not fully allayed, by consecutive quarters of broadly flat like-for-like sales performance.”
Another improved performance would also reduce some of the pressure on the chain to close stores amid a review being carried out by strategy consultants OC&C to help new managing director John Walden assess the Argos business.
Home Retail plans to close 10 stores this year, but continues to resist calls for widespread closures, claiming that they support its presence online and that only seven were loss-making.
While the outlook may look slightly rosier for Argos, Home Retail’s DIY chain Homebase is set to have experienced more tough trading.
The City expects like-for-like sales at the chain to be down 3.3%. When it last updated the market, it said seasonal products, which account for around 40% of sales in the 341-strong business, plunged by around 15% after the wet start to the summer.
Meanwhile, B&Q owner Kingfisher will reveal its half-year results on Wednesday, which are expected to show profits coming under pressure after a wet April to June period dampened demand from gardeners.
Kingfisher has previously warned it was forced to slash its prices on plants and ramp up marketing activity on indoor projects, which hit profit margins.
Department store chain John Lewis Partnership will reveal strong profit growth in its first-half results on Thursday as warmer weather and an Olympic boost helped sales.
The employee-owned partnership, which includes the department store and supermarket Waitrose, is forecast by retail analyst Nick Bubb to report a 21% rise in pre-tax profits to �109.4 million in the six months to July 30.
In an interview with the Financial Times, Charlie Mayfield, chairman of the John Lewis Partnership, said the retail group had benefited from a number of “following winds” in the six-month period.
“We’ve had any number of national events which have sparked an interest,” Mr Mayfield said, adding that the Olympics, for which John Lewis had been the official department store, had been “huge” for the retailer.
The stores group has also benefited from the launch of new technology, such as Apple’s iPad, and the switchover to digital television in the UK.
The first half of 2011 saw a slide in profit at the partnership as fierce promotions on the high street - which the group pledges to match under its promise to be never beaten on price - took their toll.
The group is likely to focus on the run-up to Christmas, a key period for the retail sector. Both John Lewis and Waitrose had a strong Christmas last year after a very difficult period in the autumn.
Chocolatier Thorntons will be hoping that a strong performance from its “Best of British” range will give its annual results a lift on Wednesday after a tough year.
The group previously warned it will roughly break even in the year to June, compared with �4.3 million profit in the previous year.
Thorntons, which employs 3,000 staff and has a 7.7% share of the UK chocolate market, recently saw an uptick in its like-for-like sales, thanks to a limited edition range which includes chocolate in the shape of a Union Jack flag and a London bus.
With supermarkets snapping up products associated with the London Olympics and Diamond Jubilee celebrations, Thorntons’ sales through commercial channels rose 45% to �9.3 million in the nine weeks to June 30.
Like-for-like sales in the same period at its own stores rose 0.7% - the first time the figure has been in positive territory for nearly three years.
But a poor Christmas, rising raw material costs and a generally weak consumer environment saw the retailer struggle for most of the year.
Buoyant Easter trading lifted sales figures but demand for all-year round products in supermarkets remained under pressure.
Its share price is nearly 50% lower than this time last year, giving the company a market value of �18.2 million.
Investors will be looking for clues as to whether the turnaround plan launched by chief executive Jonathan Hart, that involves closing up to 180 of its 579 stores over the next three years, is working.
The 100-year-old retailer also introduced a new line-up of gifting chocolate, champagne, cards and flowers designed to help lift sales for birthdays and other celebrations throughout the year, leaving it less reliant on Christmas and Easter.
The range includes personalised gifts that allow people to write names on chocolates or put a photograph on the top of a chocolate box.
Barratt Developments will add to the solid run of strong results in the housebuilding sector when it unveils its full-year results on Wednesday.
The group, which recently announced its best spring selling season for five years, forecast a 158% surge in pre-tax profits to �110 million in the year to June 30.
The firm said it was benefiting from “relative market stability” despite wider woes in the mortgage market, economy and construction sector.
The results, which have also been helped by Barratt’s use of lower cost land, come after rivals Persimmon, Bovis Homes and Taylor Wimpey all posted strong profit growth.
Chris Millington, an analyst at brokers Numis Securities, said: “Barratt remains one of the most interesting housebuilders.”
The group’s share price has more than doubled in the last 12 months, standing at 167.5p, compared to around 77p this time last year.
The industry is being assisted by government initiatives to boost the sector, which are helping compensate for a shortage in affordable mortgages.
Private forward sales at Barratt were up 34.6% by value, at �378.4 million at the end of June, while completions rose 14% to 12,637 in the year.
Barratt previously said it expects the NewBuy scheme - designed to encourage the return of 95% mortgages to stimulate demand - to continue to provide the industry with support.
The group has been benefiting from higher sales prices as it builds more family homes in London and the south east, where the market has been more robust.
It is also beginning to reap the rewards of land bought cheaply amid the financial crisis.
Pub chain JD Wetherspoon will reveal a jump in profits in its full-year results on Friday after a strong end to the year helped by the Queen’s Diamond Jubilee and Euro 2012.
The group, whose 850 pubs are mainly in town centres, is forecast to report a 15% rise in pre-tax profits to around �70 million for the year to July 29.
Wetherspoon enjoyed a strong final three months to its financial year as special events boosted footfall and lifted like-for-like sales by 6.1%, compared to a 2% rise in the previous quarter.
The group has already forecast a “reasonable outcome” for the financial year but warned the main challenges facing the chain were continuing cost pressures resulting from government legislation.
It has already warned it will the slow the pace of new pub openings in the next year to between 20 and 30 sites as it grapples with a �50 million increase in its annual tax bill, including rises in excise duty.
Although the recent special events were a major driver of the sales boost, the chain’s chairman Tim Martin said he was hopeful that people may be starting to return to pubs following the smoking ban.
He added that similar trends had been seen in parts of the United States where bars had taken a while to recover from smoking bans.
Investors will be looking for any update on current trading and the impact the Olympics had on the chain.
Wetherspoon’s shares are around 15% higher than they were a year ago.
Simon French, analyst at brokers Panmure Gordon, said: “We expect the group to trade well over the next two months reflecting the Olympics period as the group benefits from its Summer of Sport marketing campaign.”