Bagfuls of positive results expected from retail sector

THE performance of the retail sector will be in the spotlight this week when major players including Sainsbury's and Next deliver updates.

B&Q parent company Kingfisher recently raised expectations for full-year results – due to be released on Thursday – after a resilient 2009.

A tight rein on costs across the group has added to better trading, with Kingfisher telling the market that profits were expected be "slightly ahead" of the 540 million pencilled in for the year to 30 January. This would mark a significant hike on the 368m of 2008.

With the prospect of a slower UK housing market this year, the group's outlook comments will be watched with interest for clues on how it believes the DIY and gardening sector will fare for 2010.

Plumbing and heating giant Wolseley's interim results today come after the firm gave investors some rare positive news in February.

Shares rose 10 per cent after the Reading-based business said it expected trading profits for the year to July to top market expectations.

Wolseley, which trades as Build Center and Plumb Center, said the improvement reflected cost efficiencies rather than better trading conditions.

Analysts had pencilled in underlying trading profits of 326m for the full year before the update, although this has since moved up to 360m.

Retailer Next reports full-year profits on Thursday after a resurgent year for the fashion and homewares chain.

It made a series of profit upgrades throughout the year as sales continued to surprise, thanks also to improving consumer confidence.

Next said in January that it expected annual pre-tax profits of between 490m-500m, a marked improvement on the 428.8m seen a year earlier.

Annual results from insurer Legal & General tomorrow will be watched for further confirmation of a rebound in the sector following recent positive comments from its rivals.

L&G revealed a 7 per cent drop in worldwide sales during 2009 to 1.38 billion, but this was in line with market forecasts and the firm also predicted a bounce back in its core markets.

The group has been increasing efficiency, including cutting 10 per cent of its life and pensions workforce.

A 50m cost savings target was exceeded by 15m and the company said it would go further in 2010.

Analysts are expecting cost savings to have helped L&G turn around from 2008's sharp losses of 1.49bn to pre-tax profits of 516m on an IFRS accounting basis.

But in a note issued following L&G's new business figures last month, analysts at Keefe Bruyette & Woods said they were concerned over the impact of cost-cutting.

"L&G also appears to be targeting cost savings in their general insurance business – it is unclear to us whether some of this cost is coming at the expense of lower future sales because they might not be spending sufficiently on product development," they added.

Supermarket Sainsbury's reports on its fourth-quarter sales performance on Wednesday after what is expected to have been a tougher three months for the group.

The sector is thought to have suffered a particularly bad February and March as a result of the hike in VAT, as consumers reined in spending following Christmas and with higher taxes and spending cuts on the horizon.

Analysts at Bank of America estimate the supermarket industry only saw growth of between 0 per cent to 1 per cent in February, with little improvement expected for March.

Coming up against like-for-like sales growth of 6.2 per cent a year earlier, Sainsbury's is only likely to manage 1 per cent growth, according to most retail experts.