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Thursday's agenda: Retailers hold centre stage

January 16 2013, 6:38pm
Christmas trading statements from Marks & Spencer, Next, Debenhams, Ted Baker and other sources suggest that online clothing sales were very strong in the UK, which should bode well for ASOS.


The flood of Christmas trading updates from retailers continues, with Primark owner Associated British Foods reporting, along with Dixons, Home Retail, ASOS and Mothercare.

Warranties and electrical goods seller Dixons Retail (LON:DXNS) provides an update covering its fiscal third quarter, covering October, November and December.

Portuguese broker Espirito Santo is tipping a 6% increase in like-for-like (LFL) sales, “but with some negative gross margin mix from an increased weight of tablets and some additional operating cost resulting from increased staff in store to ensure new customers have a good experience.”

The broker also expects Dixons to make further price cuts over the next 12 -18 months to reduce the price gap with Amazon.

“For the Nordics & Northern Europe we estimate LFL sales increased 9%, almost as high as the 1H LFL sales growth of 11%, but with a negative impact on gross margin and a negative mix impact on margin as the growth in Denmark and Sweden outstrips that of the higher margin Norwegian business.

“For Southern Europe we anticipate a LFL sales decline of 9%, in line with the 1H. The bigger issue is what Dixons can do to dispose or restructure the business.

“Finally for Pixmania we forecast a 13% LFL sales decline, a deterioration of the -11% 2Q run rate as competition increases. But although we assume an operating loss this year of around £30m we assume this loss may moderate next year as management get to grips with the business following the change of ownership and makes a decision about the future of the business within the group.”

Argos and Homebase owner Home Retail (LON:HOME) has been feeling the biting wind of competition blowing from the Internet, as well as High Street rivals such as Tesco and Dixons.

The group makes its third quarter (Q3) trading update, covering the 18 weeks from September to December.

“For Argos … we forecast 3Q LFL sales growth of only +0.5% with a gross margin hit of -60 basis points (bps), predominantly due to an adverse sales mix along with some price investment. We believe the consensus LFL sales estimate for Argos is around 0.3% with a wide range of -2.5% to 2% and consensus gross margin estimate is c. -50bps, with a range of -75bps to 25bps,” reports Caroline Gulliver, the retail analyst at Espirito Santo.

For Homebase, Gulliver forecasts a 1.5% decline in LFL sales for the third quarter.

“We believe the consensus LFL sales estimate for Homebase is -2.3%, with a wide range of -4.2% to +1%. We are forecasting gross margin of +25 bps, with consensus c.-25 bps with a range of -100 to +50bps,” Gulliver revealed.

Panmure Gordon is a fan on online clothing retailer ASOS (LON:ASC).

The broker expects the company to report sales and margins improvement for December. “We anticipate retail sales growth of around 30% at least in line with Q1, and a flattish gross margin as own brand price repositioning is offset by two less days of Sale. Christmas trading statements from Marks & Spencer, Next, Debenhams, Ted Baker and other sources suggest that online clothing sales were very strong in the UK (c.35% of sales) in December, the month to be reported,” Panmure Gordon’s respected retail analyst Philip Dorgan said.

Announcements expected


Companies: Computacenter, Dixons Retail, Aberdeen Asset Management, Associated British Foods, Home Retail, Darty (general meeting), ASOS, Mothercare

Macroeconomic: German wholesale prices, ECB report, EU consumer prices, US housing starts, US budget statement


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