Marks & Spencer Group PLC (LON:MKS) reports its first quarter trading update on Tuesday as it faces the industry-wide challenge of weak consumer spending.
The company has long enjoyed strong sales in its food division, offsetting continued struggles at its womenswear division.
But now the group’s food sales have come under threat as consumers tighten the purse strings to tackle rising cost of living after last year’s Brexit vote made the pound slump and pushed import costs higher.
“The greatest near term uncertainty in our view remains the level of UK consumer demand where we think Food is potentially the more vulnerable of the two main categories,” said Deutsche Bank.
The bank expects food sales on a like-for-like basis to rise 0.6% in the first quarter. Clothing and home sales are likely to show no signs of a turnaround, with Deutsche Bank predicting at 1.5% fall in like-for-like sales.
Overall UK like-for-like sales are forecast to decline 0.2%.
Fourth quarter UK like-for-like sales fell 3.6%, with declines in both its clothing and food businesses, but the company blamed calendar changes that meant key December sales days and Easter fell outside the quarter.
Burberry needs to regain momentum
Burberry Group PLC (LON:BRBY), which issues a first quarter trading update on Wednesday - a day ahead of its AGM - is in the midst of a major overhaul of its business and management as the luxury goods market struggles for momentum.
Marco Gobbetti – former chief executive and chairman of fashion and accessories brand Céline, owned by French rival LVMH - only took over the reins as Burberry’s new chief executive on July 5, replacing former chief designer Christopher Bailey.
READ: Burberry's second half revenue struts lower as licensing and wholesale sales fall
The company has also poached Julie Brown from medical supplies group Smith & Nephew PLC (LON:SN.) as its chief operating officer and chief financial officer
In a recent preview note, Barclays Capital pointed out that 10 of the 18 Burberry directors in senior management have changed since the group’s 2016 accounts.
However, the broker’s analysts said, they remain optimistic about this, adding that “the speed of change at a luxury brand is slow with the first benefit (outside of cost cutting) unlikely to be seen until H2 at the earliest.”
They added: “We head into Q1 sales to June a little cautious despite an easy comp as our social media brand heat data suggests things have plateaued.”
Key to the group is the health of the Chinese economy, but the latest evidence is that China is beginning to show some weakness again.
However, for the group as a whole, it has reported better quarterly updates lately and there is expectation for some of the momentum to continue.
There may be a continued pickup in the European markets, while UK sales should be boosted by a weak sterling and overseas travellers shopping over here.
Barclays Capital’s analysts are assuming a 3% rise in Burberry’s like-for-like sales for the first quarter.
In April, Burberry reported a 1% decline in total revenue on an underlying basis for the six months to 31 March, with retail revenue - which represents 80% of the total – up 3%.
Announcements expected:
Monday July 10
Final: Falanx Group PLC (LON:FLX)
Trading Statement: Trinity Exploration & Production (LON:TRIN)
Tuesday July 11
Interims: Amino Technologies PLC (LON:AMO); Low & Bonar PLC (LON:LWB)
Finals: Ilika (LON:IKA);Polar Capital Technology Trust PLC (LON:PCT); Collagen Solutions PLC (LON:COS); Begbies Traynor Group PLC (BEG)
Trading Statements: Gocompare.com Group Plc (Lon:GOCO); Marks & Spencer Group PLC (LON:MKS); PageGroup PLC (LON:PAGE); Carillion PLC (LON:CLLN); Galliford Try plc (LON:GFRD)
Economics: Chinese consumer inflation for June
Wednesday July 12
Interim: Bankers' Investment Trust Plc (LON:BNKR)
Final: Micro Focus International PLC (LON:MCRO)
Trading Statements: Wetherspoon (JD) PLC (LON:JDW); Solid State PLC (LON:SSP); Ophir Energy (LON:OPHR); Burberry Group PLC (LON:BRBY); Hochschild Mining PLC (LON:HOC); Barratt Developments PLC (LON:BDEV)
Economics: UK unemployment May
Thursday July 13
Finals: Dart Group PLC (LON:DTG); AdEPT Telecom plc (LON:ADT)
Trading Statements: Premier Oil PLC (LON:PMO); ASOS plc (LON:ASC); Babcock International Group PLC (LON:BAB)
Economics: Janet Yellen, US Federal Reserve chair, testifies to Senate
Friday July 14
Trading Statements: Workspace Group plc (LON:WKP); Hays plc (LON:HAS);
Ashmore group PLC (LON:ASHM); FirstGroup PLC (LON:FGP); NewRiver Retail Ltd (LON:NRR)
Economics: US consumer inflation for June – forecast 1.9%