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MARKET COMMENT
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Supermarkets figure strongly in next week's line up with numbers from Sainsbury and Safeway. Other retailers are also in abundance with results from GUS, Mothercare and Burberry. GWR Group, Scottish Radio Holdings and EMI will represent the media sector while mmO2 will be flying the flag for the telecom industry.
Sainsbury (LSE: SBRY) reports half-time results on Wednesday. The company is two years into its three-year refocusing strategy and already substantial improvements have been achieved. At the outset, the supermarket said its objective was to enhance its operating margins. This was to be achieved through a better use of IT, developing its distribution chain and also through the upgrading of its stores. In its trading update last month, Sainsbury said sales continued to grow, albeit slower than its main rival Tesco (LSE: TSCO). Nevertheless, Sainsbury said margins were continuing to improve as a direct result of its cost efficiency programme. Safeway (LSE: SFW), which reports on Thursday, also promised to deliver strong first-half results. Like Sainsbury, Safeway is also seeing less than sparkling sales growth at the moment. However, its focus is also on margin improvements. It has also been the subject of bid rumours in recent weeks. GUS (LSE: GUS) reports interim results on Thursday. Whilst the focus of attention will be on GUS's Argos division, the contribution that Experian, its business information unit, makes to profits should not be overlooked. Revenues at Argos are expected to show an improvement of some 12% or 7% on a like-for-like basis. However, Experian is also expected to show a much improved performance and an increase in its sales should have a greater impact on bottom line profit, by virtue of its much higher operating margin. Burberry (LSE: BRBY), the UK's answer to Louis Vuitton, reports interim numbers on Tuesday. The upmarket fashion company, which was spun-off from GUS, recently said its first-half performance was on track. Revenues are expected to grow by 15%. Burberry's feat is especially noteworthy given that its peers in the high-fashion sector have been dogged by the economic slowdown. Don't expect any magic from the former Disney (NYSE: DIS) man, Ben Gordon, when Mothercare (LSE: MTC) reports interims on Thursday. Gordon only took over the position of chief executive at the mothers and toddlers retailer on 1 November. The company is still getting to grips with poor distribution, the foundation on which any good retailer should be based. Mothercare said in October that its like-for-like sales growth was negative, and this was due to an overhang of unsold goods. It added that its costs were still too high and cost reduction was "a matter of urgency". There are also results from mmO2 (LSE: OOM) next Tuesday. Mobile phone operators are switching their focus from customer acquisition to improvements in average revenue per user. This is expected to come from increased usage of data services. mmO2 reckons that revenue growth in the UK could come in at above 10% and that it should see an earnings margin of 30% before interest, tax, depreciation and amortisation. Notable results
Monday: Cambridge Antibody Technology, Majestic Wine, Mice Group & Torotrak The writer has a beneficial interest in Land Securities.
Tuesday: Burberry, EMI Group, GWR Group, International Power, mmO2 & SSL International.
Wednesday: Land Securities, J Sainsbury
Thursday: Chrysalis Group, Dimension Data, GUS, Mothercare, Safeway & Scottish Radio Holdings.
Friday: Lastminute.com