Every little helps for the competing supermarkets

Oct 5 2009 by Iain Laing, The Journal

THE retail sector will be in the spotlight next week with results and trading statements from Tesco, Carphone Warehouse and Sainsbury's.

The spoils of the loyalty card war will be under scrutiny tomorrow and Wednesday when Tesco and Sainsbury’s issue updates.

Tesco, which is tipped to issue solid interim figures, offered double Clubcard points in August as it fought to retain its dominance of the UK grocery market.

But recent figures suggest Tesco has slightly lost ground to rivals, with its market share slipping from 31.1% to 30.9% in the 12 weeks to September 6.

Growth – at 4.6% – was also below the level of the wider market, according to TNS Worldpanel.

Nick Coulter, of Numis Securities, said he expects like-for-like sales excluding fuel to be up by around 3%, while currency movements and acquisitions should lead to double-digit growth at the top line.

Analysts are looking for underlying profits of just under £1.5bn for the half year, a performance broadly in line with a year earlier.

Its UK figures have lagged behind rivals, with Sainsbury’s reporting a record 7.8% rise in underlying first quarter sales excluding VAT and fuel.

Sainsbury’s recently launched a new voucher loyalty scheme as part of its fight for market share.

By November, shoppers in all 535 stores will be handed money-off coupons at the till – giving them up to 20% off hundreds of branded and Sainsbury’s-own products.

The group has described the initiative as “a multi-million pound investment over five years” and its biggest customer loyalty drive since it jointly introduced the Nectar card in 2002. Sainsbury’s boosted its market share to 15.8% in September.

The opening of 15 of its newly-purchased Somerfield stores in the period should boost total sales by around 2%.

Recruitment firm Hays’ trading update on Thursday has been overshadowed by news of its eye-watering £30.4m fine from the Office of Fair Trading.

Hays took by far the biggest of almost £40m in penalties handed out to six firms by the competition watchdog for cartel activities in the supply of workers to the construction industry.

The firm called the punishment “disproportionate“, blamed a rogue ex-employee for the offence and said it was “actively considering” an appeal.

The blow comes a month after Hays posted a 43% fall in pre-tax profits to £151m for the year to June 30 as the recruitment industry struggles.

Hays said then it was seeing “initial signs” of stability but no indications of recovery.

Rival Michael Page International, which posts its own trading update on Wednesday, was not caught up in the OFT investigation. The firm, whose first-half profits also fell by half, struck a more upbeat tone and said there were signs the worst may be over.

Michael Page has cut staff numbers by 420 people, or 26%, to 1,220 in the UK, but said some teams were now selectively hiring in order to boost market share.

TalkTalk broadband firm Carphone Warehouse’s trading statement on Thursday will provide few fireworks for investors, analysts predict.

The firm has postponed until November an investor presentation which analysts thinks will unveil greater than expected cost synergies from its £236m acquisition of Tiscali’s UK business, which brought it 4.25 million customers.