Spotlight on Sainsbury’s sales

Mar 25 2008 by Iain Laing, The Journal

A SHORTENED week following the Easter break sees updates from retailers including supermarket giant Sainsbury’s and B&Q owner Kingfisher as well as North East builder Bellway and Sunderland furniture firm SCS.

Supermarket giant Sainsbury’s releases a trading update tomorrow with all eyes on how like-for-like sales have fared during tough high street conditions this year.

The retailer outshone rival Tesco over the Christmas period, delivering 3.7% same-store sales growth excluding petrol – although both were later eclipsed by a resurgent Morrisons.

Sainsbury’s chief executive Justin King said consumer budgets were under pressure over rising bills and mortgages, but those shunning the high street appeared happy to spend money on food and drink.

Sainsbury’s will update on performance during the 12 weeks to March 22 tomorrow, with market consensus suggesting like-for-like sales steady at 3.7%.

B&Q owner Kingfisher is expected to post its third successive year of falling profits on Thursday as trading conditions have remained tough for the group.

The firm said last month that it had seen a 2% drop in like-for-like sales for the three months to February 2.

The DIY sector has been hit hard by consumer belt-tightening, with the downturn in the housing market also hitting the market. But there are hopes that it is not all doom and gloom for the group. While adjusted pre-tax profits are predicted to dip to £385m for the year to February 3 from £396m the year before, analysts say the firm may give good news on performance at the 324 stores it is refurbishing.

Housebuilder Bellway will reveal if it has fared better than rivals in a cooling housing market when it reports interim results on Wednesday.

In a January update, the Newcastle firm suggested it was coping better than competitors after sales held steady during the 2007 calendar year.

Rivals such as Persimmon, Taylor Wimpey and Redrow all posted annual drops in completions during the year as the credit crunch tightened up mortgage supply.

But Bellway, which is the UK’s fourth largest housebuilder, said it expected the number of houses sold in the six months to January 2008 to be “similar” to the previous year’s figure of 3,264.

The group added that more than 70% of its sales target was in place ahead of its July year end, although market conditions continued to be challenging.

Market estimates for pre-tax profits in the six months to January 31 are £94m, compared to £107.8m for the year before.

Goodfella’s pizza maker Northern Foods pleased the City with January’s third-quarter trading, but analysts will be looking for signs of further headwinds from rising food costs in next Thursday’s pre-close update.

The Leeds-based business said it had been successful in recovering rising costs, but in the weeks following wheat prices have soared to new records. The company however looks in better shape to cope with the more difficult conditions after a business overhaul and is now focused on five key markets – ready meals, sandwiches and salads, pizza, biscuits and Christmas puddings – after selling non-core operations.

Robert Wiseman Dairies, the firm which produces around a quarter of the UK’s milk, will update on trading in a pre-close statement on Thursday.

The Glasgow-based group has faced soaring operating costs in recent months – including rocketing diesel and plastic used for containers – although it said in January it expected to cope with the price pressures “satisfactorily” in the coming months.

Home furnishing chains ScS Upholstery and Land of Leather have borne the brunt of the consumer spending squeeze as hard-pressed shoppers cut back on big-ticket purchases.

The duo both report interim results next week but have hit investors with profit warnings in recent months as the economic outlook darkens. Sunderland-based ScS scrapped its dividend payments and shelved new store openings in January after a slump in Christmas trading. More worryingly still, it sees no relief to the current trading pain before the end of the current financial year in July. Prospects are little brighter for Kent-based Land of Leather after like-for-like sales orders declined more than 15% in the 23 days to January 27 – a crucial selling period for the group. The firm, which also warned it expects the “challenging market conditions” to continue for some time, posts interims on Thursday.