Week Ahead: Sainsbury and Tesco go head-to-head

There is a retail theme to next week's results, with supermarket giants Tesco and Sainsbury set to report, along with car products provider Halfords, homewares retailer Dunelm and fashion chain Ted Baker.

On the economic front, central banks will be in focus with the European Central Bank making its interest rate announcement on Thursday, a few hours of the Fed's statement in the US.

On Friday, the big announcement is the US non-farm payrolls figure for September, with the market expecting an increase of 116,000.

Panmure Gordon's view on the trading updates of supermarket rivals Tesco and Sainsbury is that, taking the long term view, neither is very important.

"Sainsbury’s Q2 [second quarter] trading statement is not important in the context of what we expect will be significant changes to the food retailers’ strategic priorities over the next 12 months. We expect space growth to slow, investment to shift online and ultimately significant and recurring returns of capital to shareholders," the retail team at Panmure Gordon opined.

"We look for similar like-for-like sales growth in Q2 to that seen in Q1, which delivered 1.4% (ex-fuel). We expect to see continued growth online at around double that recorded by Ocado," the broker added.

Looking at the supermarket sector as a whole, Panmure Gordon thinks the ending of the "space race" and the re-focus of investment online is "but the first step to making the sector investable again and the path that we have outlined should lead to a significant revaluation."

Seymoure Pierce wants to see how the aggressive money-off coupon campaign has affected sales and profitability at Tesco. “Attention will also be focused on whether the international business has slowed much from its Q1 [first quarter] update, particularly South Korea where new opening hour legislation was introduced at the end of Q1, as well as an update on the US where losses are still unacceptably high,” the broker suggests.

The broker is forecasting a 6% fall in first half profit before tax to £1,603m and a flat dividend per share of 4.6p. "A fall in profits from the UK is expected to be partially offset by improvements in Asia, US and the bank and flat Europe," they predict.

The first quarter interim management statement from Dunelm sees the group going up easier comparatives figures, as a year ago like-for-like (LFL) sales were down 2.0% year-on-year (yoy).

"However, given the deterioration in market data, we expect a sharp slowdown in LFL sales and pencil in a flat quarter for Dunelm. Gross margin likely to show modest progress yoy," Peel Hunt suggests.

Tuesday October 02

FINALS
Wolseley
Wednesday October 03

INTERIMS
Tesco

TRADING ANNOUNCEMENTS
Sainsbury’s , Dunelm

Source : ShareCast
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