The Week Ahead: Great expectations for retail sector’s top end

Author: By Nikhil Kumar

Deutsche Bank expects evidence of “robust sales trends” owing to the continued inventory clearance, but warns that the potential for forecast upgrades is slim. “This clearance will act as a drag on gross margins in the first half and, combined with adverse foreign exchange moves in recent months, limits the near-term potential for forecast upgrades,” the broker said. “In the short term the shares may therefore give up some of their recent gains.”

Credit Suisse also weighed in ahead of the update. Given the recent share price performance, expectations appear to be running high, the broker said, adding that the “market may already be anticipating better top line performance” than it forecasts.

Today: Results/Updates: Low & Bonar, Experian and Spice.

Tomorrow: Forecast upgrades may be forthcoming when Dunelm, the specialist homewares retailer, posts a full-year trading update tomorrow, according to Numis Securities, which anticipates news of a flat like-for-like sales performance in the second half. “Although we note that Dunelm will have been negatively affected by the good weather, unless [trading] has really ‘fallen out of bed’, we wouldn’t be surprised to see some upgrades from the current level,” the broker said. Results/Updates: Alphameric, Ferrexpo and Dunelm.

Wednesday: Given recent asset sales and the departure of the London division’s managing director, Mike Hussey, investors will be hoping for further clarity on Land Securities’ strategy when the commercial property group posts an update mid-week, according to UBS.

“The company has sold over £500m of assets since the rights issue and this may be negative for earnings in the short-run,” the broker said, “[It] could provide some insight into the rationale for the sales, the price achieved relative to book value and if they plan to make any acquisitions.”

Results/Updates: Blacks Leisure, London Stock Exchange, Hochschild Mining, Rio Tinto, Enterprise Inns and Land Securities.

thursday: UBS is looking forward to an upbeat statement from BlueBay Asset Management, the fund manager, which is due to post a trading update later this week. Assets under management (AuM) should have benefited from both market appreciation and net fund inflows, the broker said, estimating total AuM of $21bn (£13bn), up 17 per cent from $18m at the end of March, thanks largely to the group’s long-only funds.

“BlueBay has benefited from strong inflows into its long-only funds, particularly the BlueBay Investment Grade Bond Fund, which was the highest-selling fund across the whole of UK/ Europe in [the] four months to April,” UBS said, adding that the group’s AuM should be strong both in absolute terms, and relative to Ashmore, which is due to publish a fourth quarter trading statement on the same day.

For Ashmore, UBS forecasts total AuM of $23.5bn, which would be unchanged from the end of March. “We would expect positive market appreciation to be offset by fund outflows,” the broker said, expressing caution ahead of the update as it sees a risk that “net fund flows could disappoint the market both in terms of absolute flows and relative to BlueBay’s flows”. “There is also a risk of consensus earnings per share downgrades,” UBS added.

The dividend will be in focus when Sports Direct posts preliminary results, owing to recent reports the payout may be scrapped. Following revelations about the loan from founder Mike Ashley to Sir David Jones, the chairman of rival JJB Sports, Investec, which weighed in on the company last week, said shareholders should use the opportunity to ask questions about various aspects of the business, including its key lending partners, current facilities, refinancing schedule and key banking covenants.

Also on Thursday, Numis expects to hear of in-line trading when Hilton Food, the food producer, posts an update. “We forecast continued double digit volume growth in central and eastern Europe,” the broker said. Results/Updates: Spectris, Mothercare, Hamworthy, Hilton Food, Sports Direct International, Ashmore, BlueBay Asset Management, and Mitchells & Butlers.

Friday: Results/Updates: Invensys and Cable & Wireless.

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