I would sell these 2 retail mammoths before this week’s updates!

Reassuring updates from ScS (LSE: SCS), as well as its sector peers, have deterred investors from selling out of furniture giant in recent weeks. Quite the opposite, in fact, with the firm’s share price rising 40% from its post-referendum lows.

But I do not believe this is reason enough for canny share pickers to hang onto the stock, and reckon this week’s trading update (slated for Tuesday, October 4th) could prompt the start of a comedown.

ScS announced back in August that like-for-like sales orders had leapt 14.8% during the 12 months to July 2016. And dispelling fears over the immediate impact of the Brexit vote, chief executive David Knight commented that “trading was strong throughout the EU referendum campaign and has continued since the vote with progress on a like-for-like basis in all retail categories.”

Still, the retail landscape in Britain remains far from stable, and the Confederation of British Industry and British Retail Consortium both put out worrying reports on consumer spending in September.

Meanwhile, the strength of ScS’s recent share price rise could see the stock succumb to heavy profit-booking should signs of sales weakness manifest themselves in this week’s release.

A saving grace for ScS might be its cheap ‘paper’ valuation — a prospective earnings multiple of 8.7 times falls well short of the FTSE 100 average of 15 times. But I would not bank on this, as investors remain fearful over the full impact of Brexit on the economy.

Time to check out?

The steady stream of disappointing data coming from Britain’s supermarkets would convince me to sell out of Tesco (LSE: TSCO) before this week’s interims (scheduled for Wednesday, 5 October).

The company underlined the fierce competitiveness in the UK’s grocery sector in June, its update advising of a mere 0.3% uptick in like-for-like sales during March-May. Chief executive Dave Lewis again cited “a challenging market with sustained deflation” as the reason for  yet another sales slowdown — Tesco saw underlying sales rise by a healthier 0.9% during the prior quarter.

The Cheshunt chain is not alone in struggling to maintain any sort of momentum at the tills, however, and fellow ‘Big Four’ operator Sainsbury’s endured a 1.1% decline in like-for-like sales in the 16 weeks to September 16th, it advised last week, worsening from the 0.8% fall in the previous three months.

The country’s traditional supermarkets are still chasing white rabbits, slashing prices week after week in order keep up with discounters Aldi and Lidl. Indeed, Morrisons and Asda announced further rounds of price cutting within a few days of each other just last month. But these measures are clearly having little effect in transforming their respective sales performances, and are instead heaping pressure on already-tight margins.

I fully expect Tesco to put out another collar-yanking trading update this week. And with the firm dealing on a huge forward P/E rating of 27 times, I reckon there is plenty of space for a hefty share price reversal.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.