The Week Ahead: Updates due from Marks & Spencer, Thomas Cook and B&Q

Marks & Spencer chief executive Marc Bolland.

Marks & Spencer chief executive Marc Bolland. - Credit: PA

Marks & Spencer’s latest performance will be in focus this week as sales within its troubled clothing division come under further scrutiny while travel agent Thomas Cook and B&Q owner Kingfisher are also due to update the City on progress.

Marks & Spencer is expected to notch up a 15th consecutive quarter of falling sales in its clothing division when it updates on trading on Thursday, despite moves to fix delivery problems at its online service.

Analysts expect the firm to report a decline of 1.2% in like-for-like sales for the fourth quarter at its general merchandise unit.

It would mark an improvement on the 5.8% slump in the previous quarter, with the retailer expected to have ironed out online order distribution problems that hit Christmas trading.

Customers complained that they were not able to make in-store click-and-collect orders for the next day, while deliveries to home addresses, which normally take three to five days, were taking up to twice that.

The City expects M&S’s food unit to have grown same store sales by 0.3%, compared 0.1% in the third quarter as the retailer’s high end offering continues to defy the supermarket price war.

Numis analyst Kate Calvert said: “We expect food to have outperformed a tough competitive backdrop and may have benefited from the recent underlying improvement in market conditions.”

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However, the continual underperformance of its general merchandise unit, which contains its clothing business, has put chief executive Marc Bolland under increasing pressure over the last year.

The retailer’s performance has stuttered despite turnaround efforts including a multi-billion pound investment drive, the hiring of new fashion executives and a celebrity-driven marketing push.

Annual profits have fallen for three years in a row and were recently overtaken by rival Next.

However, the City expects M&S to improve profits in the 2014-15 financial year to £641million from the £623m seen in 2013-14.

Last month the retailer said it would close five stores in China and shrink its Shanghai office as part of a strategic shake-up, which would see 60 jobs cut and the total number of sites in the country fall from 15 to 10.

Travel group Thomas Cook is expected to report an improvement in its performance when it posts an update on its half year trading on Tuesday.

Numis broker Wyn Ellis expects the firm to deliver an upbeat report on its UK and German markets with bookings rising strongly.

Last week, its biggest rival, Thomson and First Choice owner TUI, said winter 2014-15 closed with higher average selling prices in most markets and an increase of 1% overall. It added that its summer 2015 bookings were up 1% and average selling prices 1% higher.

Mr Ellis said: “It appears that Germans are booking more expensive long haul trips and all-inclusive holidays.”

But Numis expects trading conditions in northern Europe to remain challenging and will also watch for any signs that the recent terrorist events in Tunisia have had a negative impact on bookings.

Investors are still getting used to new chief executive Peter Fankhauser, who took the helm at Thomas Cook after the shock departure in November of his well-regarded predecessor Harriet Green, who helped narrow losses at the business after a campaign of cost savings and purge of low-margin operations.

Earlier this month the 174-year-old firm saw Chinese conglomerate Fosun buy a 5% stake in the group for £91.8m, which the travel operator hopes will help it cash in on China’s £85billion tourist market.

Thomas Cook said the deal would give it access to the fast-growing tourism market in the world’s second biggest economy “in partnership with a company with significant experience in Chinese leisure and tourism”.

Mr Fankhauser said: “China is extremely potent, it’s extremely fast growing, it’s even bigger than the US in terms of the number of foreign trips.”

The new boss of B&Q owner Kingfisher will present her strategy for the business at its full-year results on Tuesday, just days after fears emerged that its 275 million euro (£202m) acquisition of France’s Mr Bricolage may have hit the buffers.

Kingfisher, run by Veronique Laury, disclosed that it had been made aware that the majority of the board of the target firm and a major shareholder had reservations over the deal which was agreed last July. It said: “The implications for the transaction are currently uncertain.”

Kingfisher, which owns more than 1,100 stores across 11 countries in Europe and Asia, said it was still to receive clarification from those at Mr Bricolage with reservations about the deal.

Cantor Fitzgerald analyst Freddie George called the update “bizarre and disappointing” and said the acquisition would have strengthened the company’s position in the French DIY market, where it already owns Brico Depot and Castorama.

New boss Ms Laury, who took over from Sir Ian Cheshire in December, will present full-year pre-tax profits that are expected to fall 8% to £683m, due to declining sales in France and a strong pound.

Cantor Fitzgerald said Kingfisher has a strong balance sheet, which gives it options, after selling off stakes in Germany DIY chain Hornbach last March and disposing of its loss-making Chinese business for £140m in December.

Hargreaves Lansdown analyst Keith Bowman said the City will watch to see whether Ms Laury’s plans for the business include selling off underperforming stores in a move that would mirror Argos owner Home Retail Group’s actions at its DIY chain Homebase.

Home Retail Group said in October that it would close a quarter of its Homebase stores, around 80 of its 323 outlets, by early 2018.

Brokers at Deutsche Bank add that Ms Laury at Kingfisher would have to reduce the group’s large array of product lines and improve its sourcing.