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Day ahead: Christmas retail merry-go-round continues with M&S, Primark-owner AB Foods, and Tesco

Last updated: 06:00 12 Jan 2017 GMT, First published: 15:00 11 Jan 2017 GMT

M&S fashion model

The retailers’ Christmas merry-go-round will swing back towards the clothing and general merchandise sector on Thursday, with Marks & Spencer Group PLC (LON:MKS) and Primark-owner Associated British Foods PLC (LON:ABF) both set to update the City.

However, food will be far from off the table, as supermarket leader Tesco PLC (LON:TSCO) also weighs in with its festive trading statement, following on from better than forecast performances from ‘Big Four’ peers J Sainsbury plc and William Morrison Supermarkets PLC (LON:MRW) in the past few days.

But, after clothing and homewares rival Next Plc (LON:NXT) kicked off the sector Christmas updates with a profit warning last week, shareholders should be more nervous on what M&S and Primark will deliver.

READ: Next cuts profit guidance …

The hard times for clothing on the high street saw M&S’s new boss, Steve Rowe, unveil plans to cut back its general merchandise stores in November, while boosting its Simply Food chain.

Commentators are expecting M&S’s Clothing and Homewares stores to continue to struggle, reflecting increasing garment costs due to sterling’s fall, and rising inflation as a result of the weaker pound.

However, they think M&S’s food offering, and its online sales should continue the improving trend of recent years, with Next having flagged better sales from its Directory business.

Primark probed …

Discount fashion chain Primark is continuing to gain market share in the UK, and investors will also be keen to hear of progress in the US, where the business opened its first store last year

But that expansion will also put into focus the impact of the post-Brexit drop in the pound on Primark’s profits, as margins decline, although - as a food producing conglomerate too - AB Foods could see this balanced by a lift for its Sugar division.

Primark’s like-for-like sales have declined in the current financial year, and although there are soft comparatives after a weak Christmas period in 2015, Next failed to see this play out in its festive trading.

Department S …

Department stores group Debenhams PLC (LON:DEB) will also unveil Christmas trading Thursday, with the bar raised by strong numbers Wednesday from Chinese-owned rival House of Fraser.

Record trading in the final fortnight of December helped HoF report a 2.7% jump in underlying sales over  the six week period to the end of the year.

However, the firm added that its online business accounted for around 41% of total sales across the six day period, starkly illustrating the problems for high street-focused businesses.

Online fashion store ASOS plc (LON:ASC) and internet electricals retailer AO World PLC (LON:AO.) should also demonstrate that trend with their Christmas trading updates on Thursday.

Britain’s biggest retailer, however, remains Tesco, and recent industry data indicated it recorded the fastest sales growth of the ‘‘Big Four’ UK supermarkets in the last quarter.

The data from market research group Kantar Worldpanel said Tesco’s sales grew by 1.3% over the 12 weeks to January 1.

READ: Tesco record fastest sales growth …

Analysts at Shore Capital said in a preview to clients they expect the UK market leader to post like-for-like sales growth in the Christmas update within a range of 1.25%-1.75%,  with “Christmas trade perhaps accelerating rather than decelerating versus the quarter as a whole.”

That would be lower than Morrisons’ surprising growth of 2.9% for the nine weeks to January 1, which smashed analysts’ average forecast for growth of 1.1%.

But would be much better than number two player Sainsbury’s like-for-like sales growth of 0.1%, excluding fuel, for the 15 weeks to January 7, albeit that was better than consensus forecasts for a 0.8% decline.

The UK supermarket leaders have been locked in battle to combat the advance of German-owned discount chains, Aldi and Lidl, which reported even stronger Christmas performances this week.

Significant announcements expected on Thursday ….

Trading updates: AO World PLC (LON:AO.), Associated British Foods PLC (LON:ABF), ASOS plc (LON:ASC), Barratt Developments PLC (LON:BDEV), Booker PLC (LON:BOK),Debenhams PLC (LON:DEB), Dunelm Group PLC (LON:DNLM), Hays plc (LON:HAS), Hilton Food Group PLC (LON:HFG), Jupiter Fund Management PLC (LON:JUP), Marks & Spencer Group PLC (LON:MKS), Paysafe PLC (LON: PAY), Premier Oil PLC (LON:PMO), SuperGroup PLC (LON:SGP). The Gym Group PLC (LON:GYM), Tesco PLC (LON:TSCO)

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