The Week Ahead: Updates due on Argos, Currys, PC World, Primark, British Sugar, Taylor Wimpey, Bovis and Barratt
- Credit: Archant
Festive season figures from the owners of Argos, Currys and PC World will be the highlight of this week’s high street trading updates, with the property market revival also in focus as a trio of housebuilders report.
Tablet computer sales are likely to have been the driving force once more for Argos owner Home Retail Group and Currys and PC World parent Dixons Retail over the crucial Christmas period.
Following five consecutive quarters of rising sales, Argos is expected to maintain its record for like-for-like sales growth when it posts third quarter figures to January 4 on Thursday.
Tablets and computer games consoles are set to have boosted sales growth to 2.5%, an improvement on the 2.3% reported in its first half, following the launch of the PlayStation 4 and Microsoft’s Xbox One.
Argos also launched its own-brand tablet, called MyTablet, priced at less than £100 to capitalise on the broadening appeal of the computers.
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UBS predicts sales of tablets and games consoles could have risen by around 50% over Christmas, although the higher sales of less-profitable consumer electronics is expected to have hit margins.
Numis Securities said the third quarter result will be “critical” for the full-year performance at Argos, given that it represents 44% of annual sales.
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It is also an important quarter for Homebase, also owned by Home Retail Group, in terms of gift item sales. July’s summer heatwave helped the DIY chain post its best half-year sales figures for at least 11 years in October, at 5.9%, but analysts expect growth to ease to 2.5% in the latest quarter
Currys and PC World owner Dixons Retail, which also updates on Thursday, is set to reveal a slowdown in sales growth as it comes up against tough comparisons from a year earlier after the demise of rival Comet.
UBS is forecasting UK like-for-like growth of 3% in the group’s third quarter to January 4, down sharply on the 12% seen in the second quarter. It believes margins will likewise have come under pressure, particularly from online price competition.
But Matthew Taylor at Numis Securities forecasts “further solid underlying progress”, with sales growth of 5% pencilled in thanks to market share gains and buoyant tablet sales.
Recent moves by supermarket giant Tesco to reduce its store space selling electricals is also likely to have helped Dixons.
Budget fashion chain Primark, owned by Associated British Foods (ABF), is also among the clutch of retailers posting figures and is likely to have benefited from the trend for savvy shopping from cost-conscious consumers.
While clothing sales at rivals such as Marks & Spencer and department store chain Debenhams suffered as they were forced into aggressive discounting in the run up to Christmas, Primark is set to have fared well from its value proposition when it reports on Thursday, having seen saw profits rise 44% in the year to September 14.
And ABF said in early December that Primark like-for-like sales were up again in the first two months of its new financial year despite “exceptional” hikes seen a year earlier, when sales surged 25% in the festive quarter.
Primark expects to add more than one million of square feet of selling space this year as its appeal shows no sign of slowing. It opened the first of five stores planned in France in mid-December.
Primark will be the engine of growth again for ABF this financial year, although solid progress is also expected from its grocery division, which includes kitchen cupboard brands Ryvita, Ovaltine and Silver Spoon sugar.
The grocery arm lifted annual profits by 24% to £232million and ABFF said in December it was expecting more profits growth this year.
However, its sugar business will have faced further pressure amid falling EU sugar prices, which left the unit’s full-year profits 15% lower at £435m and is expected to drive another fall this financial year.
A flurry of trading updates from housebuilders will confirm that 2013 was another barnstorming year for the sector after the economic recovery and government schemes spurred on a property market revival.
Last year saw the return of queues of would-be buyers desperate to snap up new builds as the Help to Buy initiative and rush of mortgage availability sent demand soaring.
Persimmon kicked off the end-of-year updates with a better-than-expected rise in annual revenues after home sales surged by a quarter in the final six months.
It has laid the ground for what is expected to be similarly strong sales figures this week from rivals Taylor Wimpey, Bovis Homes and Barratt Developments.
But the City will also be keen for clues as to how the market will perform in 2014, given that one of the major stimulus measures, Funding for Lending, has of this month been axed for mortgages.
Taylor Wimpey, which updates on Wednesday, posted a 42% leap in half-year profits and hailed its highest ever order book over the first six months of 2013, up 35% to a record £1.3billion.
It added in November that second half sales rates were running higher than a year earlier thanks to the usual autumn up-tick in demand.
Analysts at Deutsche Bank are forecasting a 10% increase in revenues for the final six months, driven by an 8.7% hike in sales volumes, and pencilling in a 40% rise in full-year pre-tax profits to £292m.
Bovis Homes has already provided detailed guidance ahead of its update on Thursday, expecting legal completions to rise by nearly a fifth to around 2,800 in 2013 with average selling prices around 10% higher thanks to its strategy of building family homes in the affluent south. Full-year pre-tax profits are forecast to increase by 29% to £76m, according to Deutsche Bank.
The sector remains bullish over prospects for 2014, despite the easing of mortgage boosting initiatives. An ongoing shortage of supply and the Government’s Help to Buy scheme for those with small deposits is expected to keep the market recovery on track.
Persimmon said it had stepped up construction “substantially” to meet soaring demand, adding that forward orders were up 41%, at around £908m.
Bovis noted in November that its private sales order book was “materially greater” than those seen at the start of 2013.
Tuesday’s update from Barratt Developments is likely to see more of the same, with the group recently reporting sales and prices up, with forward private orders 47% higher.
It said last year it had seen buyers queuing for new developments for the first time in years, with some lining up since 4am for one new housing scheme at Newbury in Berkshire and increasing numbers of people trying to buy sites before they have even launched.
The group delivered a 73.7% surge in underlying pre-tax profits to £192.3m for the year to June 30 - prompting it to announce its first shareholder dividend payment since 2008.