Following mixed industry data and a 40-year low in consumer confidence data, results from a group of FTSE 350 retailers will provide a further useful perspective on how households are coping with the surging cost of living.
Kingfisher, Marks & Spencer, Pets at Home, Topps Tiles, Auto Trader and Wickes will all provide a slightly different angle on the matter.
The entire sector has been impacted in different ways by inflation and the war in Ukraine, with most prices and wages on the rise and supply chains often challenged.
Fresh industry data on Friday showed UK retail sales volumes in April were down 4.9% on a year earlier but this was comfortably better than economists’ forecasts of a 7.2% decline. The more volatile month-on-month figures showed a 1.4% rise after falling 1.2% in March.
On the same day, Gfk consumer confidence numbers for May fell to a record low of -40.
Marks and Spencer Group PLC (LSE:MKS) will be releasing its full-year results on Wednesday, two months after the food-and-clothes chain revealed that chief executive Steve Rowe will be stepping down on the day the numbers are released.
After six years at the helm, Rowe is being succeeded by joint bosses Steve Machin (in charge of the Food arm and day-to-day leadership) and Katie Bickerstaffe ("global omnichannel, digital and data future").
Shares in the group are down over 40% since the start of the year but roughly flat since the start of 2021, with analysts at Barclays suggesting this is because M&S is “more in the quality than price camp within the retail sector”, which it believes could mean it becomes the discount option for the more affluent customers.
Barclays expects profit before tax for the year to come in at £525mln for the past year, slightly ahead of previously set guidance of at least £500mln, before declining in the current year due to the absence of the business rates relief and a lower Ocado joint venture contribution, as well impacts from international sales and its Russian franchises.
The outlook from the new joint CEOs will be key.
But first up on Monday will be FTSE 100-listed Kingfisher PLC (LSE:KGF), which has enjoyed improved fortunes over the pandemic boom-time for home improvements.
The B&Q and Screwfix owner will not be able to escape concerns about inflation and how it will effect household purse strings in the months to come.
“Although some fresh DIY converts may put down their paintbrushes forever, it’s likely that a sizeable chunk that picked up a hammer for the first time will keep coming back, thanks to their new skills and a shortage of labour in the building trade," said Susannah Streeter, analyst at Hargreaves Lansdown.
She said there will be particular interest in whether Kingfisher has managed to hang onto the higher market share it acquired during the pandemic, as well as how it is coping with supply chain issues.
There’s has also been a call for the group to bump up its dividends, with RBC Capital Markets saying that, given its depressed share price, high returns it would "make sense" to follow up the £300mln buyback completed in April.
Pets at Home Group PLC (LSE:PETS) was another to have seen a huge increase in demand during lockdowns, with the increase in working from home and perhaps also the number of people moving out of big cities.
Pets is expected to post record sales and underlying pre-tax profit of £140mln for the full year.
Commentary on costs and the impact on profit margins will be something to watch out for, analysts said.