| CATEGORY: COMPANY NEWS PREVIEW SECTOR: FOOD & DRUG RETAILERS |
Tuesday preview: Tesco, Debenhams, housing activity |
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Mon 11 Jan 2010
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LONDON (SHARECAST) - The Christmas trading statement from supermarket giant Tesco, covering the six weeks to 9 January, will probably see the company’s like for like sales growth trailing in the wake of its main rivals.
Rival supermarket operator Sainsbury has set the bar fairly high, after it reported the final quarter of 2009 saw like for like (lfl) sales, excluding fuel, rise by 3.7% year on year, or by 4.2% with VAT excluded. Like for like sales, including fuel, rose by 3.8% in the 13 weeks to 2 January.
Citigroup predicts Tesco will reveal a 2% year on year improvement in lfl sales, excluding fuel and VAT, and says ‘the trend has been clearly deteriorating since August, worse than the industry, despite the introduction of Double Clubcard points.’
The broker added that ‘Tesco have said they will state clearly the impact of double points on sales. The result, though, is that we estimate underlying UK LFL sales growth to be just 1.5% in December.’
JP Morgan Chase (JPM) is more optimistic than Citi, and is going for 3.7% growth in lfl sales, excluding fuel and VAT, with non-food growing faster than groceries. ‘Excluding the benefit of store extensions in LFLs, the underlying growth would be close to c2.3%, we estimate. We expect 2.9% new space contribution to sales growth, giving total sales growth of 6.6% on an ex-petrol and ex-VAT basis,’ JPM said.
However, in the context of the Clubcard promotion and the heavy advertising blitz over Christmas ‘we would find this performance relatively unexciting, and below that of the other big 3 food retailers,’ JPM added.
Throughout 2009 the battlefield in the supermarket arena was at the value end of the market but in a sign that consumer confidence is returning, Tesco is expected to report buoyant sales of its ‘Finest’ range over Christmas. The company should also have benefited once again from the demise of Woolworth and thus seen solid growth in sales of DVDs and toys.
Where Tesco differs from Sainsbury is its increasing reliance on overseas markets, and here Citi thinks international growth, excluding currency fluctuations, may show a slight improvement from the third quarter, and is tipping lfl sales growth of 6.5%. Online sales could also be a bright spot.
JPM predicts a 7% improvement in lfl sales in the international division at constant exchange rates
If the results of privately owned rival House of Fraser are anything to go by, department store Debenhams should have had a sparkling Christmas. House of Fraser said like for like sales grew by 7.1% for the eight weeks to January 2, with the company seeing record breaking performances in the week before Christmas and on Boxing Day.
Debenhams has reduced its debt levels sharply to £590.3m at it fiscal year end of 29 August 2009, down by £403.7m since the beginning of 2009. A further pre-payment of £100m of debt after the year end reduced debts further. The firm’s debt position improved dramatically after it raised £323m through an open offer and placing in June.
Sticking with the retail theme, the retail sales monitor from the British Retail Consortium (BRC) is expected to show sales activity picked up strongly in December as the Christmas sales got underway.
Expectations are for total retail sales to be 5.0% higher than in December of 2008, or 2.5% on a like for like basis. This would represent an improvement on the respective rates of +4.1% and +1.8% in November.
The Royal Institute of Chartererd Surveyors’ housing market survey for December is expected to show a slackening in the rate of growth in housing market activity.
In November the balance of surveyors reporting that house prices increased over the previous three months was +35%, and December is expected to see that figure edge up to +36%.
INTERIM DIVIDEND PAYMENT DATE
Morgan Crucible, TR Property Inv Trust, TR Property Inv Trust Sigma Shares
FINALS
IDOX
AGMS
Baring Emerging Europe, Debenhams, The Conygar Investment Company, Topps Tiles
TRADING ANNOUNCEMENTS
Dunelm Group, Game Group, Signet, Tesco, Weir Group
FINAL DIVIDEND PAYMENT DATE
Centaur Media, Forest Support Services, Northamber, RSM Tenon Group, Waterman Group
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Trade Balance (US) (15:30)
Bank of France Business Sentiment (FRA) (07:30)
Current Account (FRA) (07:45)
UK ECONOMIC ANNOUNCEMENTS
Visible Trade Balance (09:30)
DCLG House Prices (09:30)
BRC Retail Sales Monitor (00:01)
RICS House Price Balance (00:01)
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