GG now spends rainy days trading equities and currencies. He likes to use a combination of technical analysis and news flow to make trading decisions.
Sainsbury and Kingfisher
After the Easter break it is the turn of a couple of the UK’s leading retailers to issue trading updates.
First out of the blocks will be Sainsbury which issues a Q4 trading statement on Wednesday. Sainsbury’s shares have been poor performers in recent months, at one point holding the somewhat dubious accolade of being the worst performing stock in the food retailing sector. This is partly technical, as takeover hopes (from the Qatari backed Delta Two-who own 25%) have receded and now manifest themselves as fears about a potential stock overhang. Add in competition from a rejuvenated Wm Morrison and it is easy to see why investors have given the shares the cold shoulder.
Expectation is that sales will have grown by about 3.5% on a like-for-like basis, although there have been issues with ‘availability’ and fears are rising that Asda will become even more aggressive about lowering prices. Analysts will be keen to hear about plans to increase sales from its non-food offering by £1bn over 3 years-given that Asda and Tesco are already some way ahead on this and that their stores are much larger than Sainsbury’s.
Investors will be keen to hear what Ian Cheshire, the new CEO of Kingfisher (the DIY group behind B&Q and Screwfix) has to say when he announces full year results on Thursday. Of more interest than the numbers (analysts anticipate about £385m) will be any strategic plan that Mr. Cheshire has devised since taking over in January.
First up might be a hefty cut in the dividend, as the group needs to de-leverage its balance sheet in a tough trading environment. Capex is also expected to be chopped back to around £400M, potentially delaying or scrapping 12 new stores that were anticipated. A review and potential sale of some of the company’s international assets (Italy, Germany?) is also possible, although the company is keen to retain its Chinese operation. Clearly, Kingfisher is in need of some strong medicine, but will it all come at once?
March 26th, 2008 at 1:46 pm
Blimey, Sainsbury’s has pulled 2 rabbits out of the hat this morning.
Firstly, l-f-l sales were 4.1%, well above consensus estimates of 3.5% showing that as yet, Sainsbury’s isn’t losing momentum in the battle beteen Tesco and Morrisons.
Secondly, there is an interesting £1.2bn deal with British Land to improve and extend 38 stores, giving more credence to what some see as ambitious targets to increase the proprtion of non-food sales quite rapidly over the next 3 years.
Will be interesting to see how the ‘Feed your family for a fiver’ campaign goes and whether another ’supermarket price war’ is in the offing-still might mean cheaper nosh for a bit, but I very much doubt it will be on the stuff I buy!
Shares have reacted well, currently up 3.5% or so
March 27th, 2008 at 9:27 am
Kingfisher results were pretty much as the weekend press suggested (now maybe that’s an area where the FSA should get involved).
Profits at £386m, dividend slashed by 50% ….oh and capex cut back to….. let me guess…… ah yes….£400m! Wish the analysts in my day had ben as accurate with their numbers!
In a departure from the aforementioned script, Chinese operations are the first to be restructured, with a £33m provision over 2 years.
Don’t see too much to get desperately excited about here-a sentiment shared by the market, which has the shares currently UNC!