Tesco set to unveil Christmas sales data
SUPERMARKET giant Tesco is the biggest name among a raft of retailers posting updates this week.
The retail giant will be the second of the big supermarkets to report third-quarter figures, with results covering the key festive period due out tomorrow.
The update from the UK’s largest grocer comes after mixed fortunes for retailers so far this year, although supermarket trading appears to be one of the few bright spots from the high street.
Rival Sainsbury’s posted 3.7% like-for-like growth over the Christmas period, with Waitrose also ahead, reporting a 6.1% year-on-year increase in sales for the five weeks to January 5.
And research last week from TNS said till rolls for the supermarkets were up an average of 5% in the 12 weeks to December 30.
The data suggested Morrisons was the big winner, with sales in the period growing at nearly twice the rate of its three big rivals.
The market is expecting Tesco to report a healthy 4% increase in like-for-like sales, excluding petrol.
This compares with a higher 5.9% hike in third-quarter trading last year.
But Nick Bubb from Pali International sounded a note of caution, saying he would not be surprised if Tesco had lost out in 2007 amid Morrisons’ resurgence, seeing sales grow at nearer 3% like-for-like.
He said: “Unless the like-for-like income is boosted by the early January period or by the growth of Tesco Direct, we wouldn’t be surprised by an outcome of nearer 3% like-for-like, which would be a big miss in food retailing terms.”
Mr Bubb added that the shares could weaken on any UK trading disappointment.
Goodfella’s pizza and Fox’s Biscuits firm Northern Foods should have healthy news for investors tomorrow when it updates on third-quarter trading, despite rising food prices.
The Leeds-based company last month reported steady progress across the business after managing to recover higher commodity costs from its customers, which include Marks & Spencer.
Northern’s half-year profits of £20.1m came in ahead of market expectations in spite of the higher overhead costs.
While second-half conditions will be tougher, the company also inspired confidence last month by unveiling a share buyback programme and reaffirming plans to grow the business organically and through acquisitions.
Merrill Lynch analyst Robert Waldschmidt said: “In our opinion, management would not issue such a statement this side of the important Christmas trading period without strong confidence that the business will continue to hold up in difficult conditions.”
The group is now focused on five key markets – ready meals, sandwiches and salads, pizza, biscuits and Christmas puddings – after selling non-core operations and restructuring its business.
In November the company bought Swansea-based Ethnic Cuisine – a supplier of oriental dishes to Sainsbury’s and Brake Brothers with annual revenues of £24m – while this week the firm also snapped up Baxter’s Food’s Grimsby-based chilled soup manufacturing plant.
Another host of high-street names line up to post festive updates this week after a turbulent week on the stock market for the retail sector.
Analysts fear the worst for the likes of Argos owner Home Retail Group and Comet firm Kesa Electricals, which both update on Thursday, after concerns over how well “big-ticket” spending will hold up amid growing signs of a consumer slowdown.
Currys owner DSG International sounded the alarm last week after warning profits would be £50m lower than market hopes. While Home Retail beat expectations with first-half profits, consensus forecasts see like-for-like sales at Argos slowing to 0.6% in the 18 weeks to January 5, with Homebase down 1.6%.
But Pali International analyst Nick Bubb believes both Home Retail and Kesa could offer more disappointment.
He said: “Kesa has been hard hit after the DSG profit warning and there is scope for disappointment in trading at Comet.
“The market expects Argos’s third- quarter like-for-like sales to be no worse than flat, but that would be a miracle in the current climate.
“Given weak toy and furniture markets and tough trading in electricals, we wouldn’t be surprised by a fall of at least 2%.”
Woolworths is set to be another high- street struggler on Wednesday despite what is likely to have been a stronger performance from its wholesale arm, which provides supermarkets and other retailers with CDs, DVDs and entertainment products.
The company was gearing up for Christmas in cautious mood in October, with like-for-like retail sales declining 0.4% in the 38 weeks to October 27.
Deutsche Bank analyst Warwick Okines expects the struggle to continue.
He said: “Despite the progress made with multi-channel retail, product ranges and stores, and the strong DVD and games markets, we anticipate Woolworths main chain will struggle to generate like-for-like sales growth in the year ahead.”
