INVESTORS fears that Sainsbury's is suffering in the economic downturn are likely to be confirmed this week with the supermarket chain set to report a drop in growth as cost-conscious shoppers switch to discount rivals.
Last week Britain's largest retailer, Tesco, revealed an impressive 10 per cent increase in profits and signalled a major drive to improve its price offering in the face of shoppers focusing on bargains over quality.
Sainsbury's second-quarter tra
ding update on Wednesday will be examined to see what impact discounters and the economic slowdown are having on its sales performance.
The company's first-quarter like-for-like sales growth slowed to 3.4 per cent, down from 4.1per cent in the previous quarter and below the 5.1 per cent seen this time last year.
Industry figures last week also revealed a declining market share for Sainsbury's, down from 16 to 15.8 per cent during the 12 weeks to 7 September. By contrast, the share for Aldi rose from 2.6 to 2.9 per cent.
Nick Bubb, retail analyst at Pali International, said that Sainsbury's relatively upmarket position meant it was under pressure. He is expecting a 3 per cent rise in like-for-like sales, worse than the 3.9 per cent consensus.
Sainsbury's will lead a pack of high street companies expected to portray contrasting fortunes this week amid a fall in confidence among consumers.
A resilient performance from its travel stores should help retailer WH Smith deliver a steady set of full-year results.
The group's travel division recently reported a like-for-like half-year sales increase of 3 per cent, excluding tobacco – a creditable performance during the consumer spending slowdown.
Half-year profits at the arm, which boasts around 430 units in locations such as airports, stations and motorway service areas, also increased by 13 per cent to £17 million.
Its performance helped to offset a 3 per cent drop in same-store sales for its 546 shops on the high street. High street half-year profits fell by £1m to £50m.
Back in June, WH Smith said it was confident of the full-year outcome, which analysts believe will result in pre-tax profits of £74m or £75m. Last year the business made £76m.
Analyst David Stoddart at Altium Securities said: "The major concern over WH Smith is the continuation of like-for-like sales declines in the high street chain."
Elsewhere, home shopping group N Brown will reveal whether it has continued to buck the retail gloom when it reports interim results tomorrow. The group, which caters to larger and older customers, said turnover from continuing operations rose 12.3 per cent in the 17 weeks to 28 June, and in July the group said that sales growth had improved during the past two months, with May's sunny spell driving "particularly strong" trade as it coincided with the mail-out of its summer ranges.
Two other updates from the high street are due, from chocolate maker Thorntons and baker Greggs.
Thorntons issues a first-quarter update on Wednesday, and will be hoping to keep up the momentum after posting a near 20 per cent rise in annual pre-tax profits, to £8.5m.
Newcastle-based Greggs, which issues interim results on Thursday, has also proved resilient to the UK economic slowdown.
Like-for-like sales in the six weeks to the end of July were up 5.8 per cent, an increase on the 5.1 per cent rise during the first half of the year.
WHAT NEXT?WOOD Group will seek to reassure investors over future investment in the oil services sector when it delivers its first trading statement of its financial year this week.
In the past three months, the period which this Thursday's statement will cover, oil prices have surged close to $150 a barrel, before falling below $100 a barrel as fears for supply and concerns for the economy created unprecedented volatility in the markets. When Wood delivered its annual results at the end of August, chief executive Allister Langlands said the day-to-day price of crude oil was largely irrelevant to the company. Most of its business stemmed from projects that took several years to complete.
Nevertheless, since the end of August Wood Group shares have fallen by more than a third, with the value of the company falling to £1.7 billion, putting it near the bottom of the FTSE 100 index.
The full article contains 754 words and appears in The Scotsman newspaper.
