The Week Ahead: Updates due from Morrisons, Dixons Carphone and Halfords
- Credit: PA
The new boss of Morrisons will face his first annual general meeting this week while Dixons Carphone and Halfords are due to update the City on their latest progress.
Morrisons chief executive David Potts faces his first annual general meeting on Thursday a year after predecessor Dalton Philips was submitted to a humiliating dressing-down in front of shareholders by former chairman Sir Ken Morrison.
Sir Ken described Mr Philips’s strategy as “bullshit”, as the then-boss faced intense pressure amid sliding sales and a fierce supermarket price war, with Britain’s top grocers squeezed by discounters Aldi and Lidl.
Mr Potts, who has more than 40 years’ retailing experience at Tesco, took the helm at the Bradford-based chain in March, days after it revealed that it had slumped to a loss of £792million for the year to February 1.
The loss was driven by a £1.3bn property value write-down but underlying profits excluding this also suffered, with a 52% fall, illustrating the challenge faced by the new chief executive.
Shareholders at the AGM in Bradford may be anxious to see whether Sir Ken passes judgment on the new direction under Mr Potts.
Earlier this month, Morrisons reported a 2.9% decline in like-for-like sales for the 13 weeks to May 3 at the chain compared to the same period a year earlier when there had been a 7.1% fall.
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Mr Potts is carrying out a review of the business which will report back at the time of the group’s interim results in September but his tenure has already seen seven out of the 10 people on the supermarket’s management board either leaving the business or changing roles.
Meanwhile, last month the chain said it would axe up to 720 jobs from its Bradford head office as part of its drive to beef up staff on its shop floors. Mr Potts also told staff at headquarters that he expects them to work at one of its stores for at least one week each year.
In its supermarkets, Morrisons has begun recruiting 5,000 shop floor staff to improve service, increase availability and open more checkouts.
Shore Capital analyst Clive Black said Mr Potts had “hit the ground running.” He added: “It is clearly still very early days in Mr. Potts’ tenure but we sense he is bringing a deep rooted and fundamental change to Morrison’s that is for the better.”
Recently Sainsbury’s reported an annual £72m bottom-line loss, and rival Tesco racked up a full-year deficit of £6.4bn. Both chains were also driven into the red by the lower value of their store estates.
The newly-created company behind Carphone Warehouse and Currys PC World is expected to post solid trading on Wednesday amid tough times on the high street.
Analysts on average expect Dixons Carphone, which is worth £5bn after a merger last summer, to post like-for-like sales up 5% year-on-year in an update on the final four months of its financial year, boosted by a strong performance in the electricals market.
This would be down on the previous quarter’s same store sales of 8% year-on-year, but that period had included the crucial Christmas period as well as successful November Black Friday promotions.
Brokers at Investec expect the combined firm to benefit from the collapse of the 720-chain rival Phones4U last September, and its successful roll-out of Carphone Warehouse concessions in Dixons outlets.
Investec estimated the first 35 stores with Carphone concessions boosted like-for-like sales by 0.5% in the previous quarter, and over the longer term the roll-out will add £180m of new sales.
The broker adds that the Carphone concessions will contribute a further £160m to revenues, once Dixons’ prior agreement with Phones4U to run mobile concessions in 160 Currys/PC World megastores is completely replaced with Carphone units.
Dixons Carphone, led by chief executive Sebastian James, is the market leader in UK electricals with around 20% of sales, and although Investec thinks this market is currently flat it believes the merged business will be able to outperform its rivals.
The firm expects profits for the year to June will be stronger than market forecasts of between £355m and £375m.
Halfords is expected to unveil higher profits next Friday as the City gets its first look at the bicycle and car parts firm’s new chief executive.
The business is expected to post an 8.2% rise in full-year pre-tax profits to £78.8m, driven by the nation’s renewed interest in cycling and bicycle ranges from Olympic champions such as Chris Boardman and Victoria Pendleton.
The results will be unveiled by new chief executive Jill McDonald, who joined this month from fast food chain McDonald’s where she was the UK boss.
She replaces Matt Davies, who was lured to Tesco to become head of its UK operations. Mr Davies had only taken over in October 2012 following a profit warning that sparked the departure of his predecessor, David Wild, earlier that year.
Under Mr Davies’ tenure annual profits had turned higher, boosted by growing bike sales, amid a three-year investment programme to upgrade stores.
Brokers at Deutsche Bank said: “Given the success of the current Halfords strategy we do not expect major change of direction, particularly at this early stage.”
Halfords employs around 11,000 people at 468 stores in the UK and Ireland and at more than 300 Autocentres garages.
In November it said it would further capitalise on the explosion of interest in the sport by rolling out a chain of standalone cycle shops across the UK.