Second quarter earnings from Tesco on Wednesday will be the latest despatch from the front line of thee grocery wars.
Rival Wm Morrisons Supermarkets PLC’s recent half-year results showed the floundering chain’s decision to take the fight to the hard discounters was showing signs of working, but the trading update from upmarket competitor J Sainsbury plc was more of a mixed bag.
As the sector’s 800 lb gorilla, Tesco should be better placed to use its muscle to resist erosion of its market share and the first quarter figures, announced in June, at least showed the core UK business registering year-on-year (YOY) growth in like-for-like (LFL) sales.
LFL sales rose 0.3%, with volumes up 2.2% and the number of transactions up 1.7%, which tells us that food price deflation remains a problem for supermarkets.
“Fierce price competition and promotions are likely to remain a squeeze on margins for some time and the revised strategy is going to take time to implement. Investors backing the new management will be hoping that the signs of improvement in the June results will, like the share price, have continued,” suggested Graham Spooner at The Share Centre.
The first quarter trading statement from bedding and curtains group Dunelm PLC (LON:DNLM) comes not long after its full-year results last month, which saw the company report in-line profits of £128.9mln.
The company will be going up against some very tough comparatives from a year ago, so LFL sales are likely to be well down on last year – perhaps by around 3%, Numis Securities suggested – though the impact of the weather is hard to suss, the broker admitted.
Away from the retail sector, Acal Plc (LON:ACL), the leading supplier of customised industrial electronics, is expecting to make further progress this year, though the first quarter of the company’s financial year (April – June) did see sales trail those of a year earlier.
On the plus side, July orders were ahead YOY and book-to-bill was positive.
“The outlook is suitably cautious and many markets are still challenging, but contract wins and cost cuts in H1 point to improvement in H2,” notes Peel Hunt.
“The acquisition pipeline should still be healthy and the consolidation opportunity remains compelling. Acal continues to deliver its strategic objectives despite difficult macro conditions and has plenty to go for in the long term,” the broker said.
Significant announcements expected
Interims: Morses Club PLC (LON:MCL)