The Week Ahead: Updates due from Sainsbury’s, Argos and Homebase owner Home Retail Group and PZ Cussons
- Credit: PA
Supermarket Sainsbury’s will take the corporate spotlight this week when it reports on recent trading, with an update also due from Argos and Homebase parent Home Retail Group in a busy week for the retail sector.
Sainsbury’s is expected to reveal further sales growth at the expense of beleaguered rival Tesco when it reports on first-quarter trading on Wednesday.
Analysts believe a 34th successive quarter of like-for-like sales increases is on the cards after Sainsbury’s recently announced its fifth year of profit growth in a row.
Latest retail figures from Kantar Worldpanel show it was the only one of the four large supermarkets to gain market share, with the others being squeezed from opposite ends of the market by the likes of Waitrose and Aldi.
Keith Bowman of Hargreaves Lansdown said a good Easter performance and strong contribution from the supermarket’s convenience stores were expected in the latest update, but that there were concerns over a lack of growth in the group’s profit margin.
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Investec analyst Dave McCarthy is pencilling in 2% like-for-like sales growth, saying that Sainsbury’s “appears to be taking share from Tesco at an increasing rate”. Shore Capital expects an increase of around 3%.
This would mark a slowdown on the 3.6% like-for-like increase in the previous quarter, but this would largely reflect tough comparisons against a year earlier due to the 2012 Diamond Jubilee bank holiday.
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It would also put rival Tesco in the shade, which saw sales fall 1% in its first quarter, raising fears that its recovery plans have stalled.
Sainsbury’s chief executive Justin King, who saw his annual pay package surge to £4.3million, is credited with turning around the supermarket’s fortunes since joining in 2004.
He last month committed his future to the grocer after reports suggested he was set to leave to become boss of Formula One motor racing.
Catalogue retailer Argos comes into focus on Thursday when first quarter trading will reveal if it has maintained the recent turnaround that has seen it return to year-on-year profits growth.
An online push boosted the retailer’s annual figures, reported last month, but analysts have raised questions over whether its electricals division, boosted by a surge in sales of tablet computers, can maintain its momentum.
The drive for growth has also seen Argos undergoing an overhaul, which involves closing or relocating at least 75 stores over the next five years.
Parent company Home Retail Group posted its fifth consecutive slump in annual earnings last month as the improved Argos performance was dragged down by weather-hit sales at DIY chain Homebase, which it also owns. Overall underlying pre-tax profits for Home Retail Group were down 10% to £91m.
However, analysts are expecting that in the current financial year they will grow for the first time since 2008, with a figure of £100m predicted for 2013/14. Thursday’s first quarter trading update will give the first indication of whether chief executive Terry Duddy has kept the recovery on track in the face of yet more poor weather after the coldest spring for 50 years.
Keith Bowman of Hargreaves Lansdown stockbrokers said there was scepticism over the company, with concerns over whether Argos was able to continue good electrical sales and fears that Homebase was likely to have suffered again from poor weather.
Wednesday’s trading update from online fashion firm ASOS is set to show further impressive sales growth as demand from “fashion-forward twenty somethings’’ shows no sign of slowing.
The company recently reported an 11% leap in pre-tax profits to £25.6m in the six months to the end of February after total retail sales rose 34% from £262m to £352m.
Analysts expect the group to have performed well since then, although fashion firms have struggled amid the coldest spring in 50 years. Analysts at Panmure Gordon are forecasting UK sales growth of 39% for the third quarter to £64.5m.
PZ Cussons, maker of Imperial Leather, Carex and Original Source, is due to update the City on its latest performance on Thursday as it battles for business amid squeezed consumer incomes.
It will be looking to build on a positive update earlier in the year when it announced it had grown first-half profits, following a reverse last year. However, it also cautioned that it continued to face “challenging” trading conditions in most of its markets.
Numis recently forecast annual profits, which will be unveiled in July, to rise to £108.4m after last year’s decline, still slightly below 2011’s figure.