The Week ahead: Supermarkets prepare to give City food for thought

Tesco: Has stuttered in US and Japanese markets. Picture: Neil Hanna
Tesco: Has stuttered in US and Japanese markets. Picture: Neil Hanna
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BRITAIN’S biggest and third-biggest supermarket chains, Tesco and Sainsbury’s respectively, go toe-to-toe this week with their latest trading updates. Many City analysts forecast Tesco will again bear the scars of tough trading when it puts out its first-quarter figures this morning, just months after chief executive Philip Clarke unveiled a £1 billion recovery plan including store revamps and thousands of extra shopfloor staff.

Andrew Kasoulis, an analyst at Credit Suisse, expects Tesco’s like-for-like sales, excluding fuel and VAT, to have fallen a further 1.5 per cent in the 13 weeks to 26 May. That compares with a 1.6 per cent fall in same-floorspace sales in the previous quarter, which in turn followed a profits warning by the group in January.

The lacklustre sales performance comes at a time when food price inflation has been at more than 4 per cent, indicating that underlying sales volumes at Tesco are significantly down.

Sainsbury’s puts out its figures on Wednesday, with analysts expecting Justin King’s group to have benefited more from strong sales of party food and patriotic fare for the Queen’s Diamond Jubilee, the company having been one of the main sponsors of the River Thames pageant the previous weekend.

Sainsbury’s also organised its own jubilee family festival in Hyde Park featuring performances from BBC One’s Strictly Come Dancing.

James Anstead, an analyst at Barclays Capital, expects the food retailer to report like-for-like sales up 2 per cent, slightly down on the 2.6 per cent in the previous quarter, but he hails it as “a good performance” considering one of the rainiest, coldest British springs on record.

Flybe, Europe’s biggest regional airline, will announce deeper losses when it posts results today as it is has been hit by slower business and leisure traffic.

The airline, which flies from airports including Edinburgh and East Midlands, is set to make a loss of around £8.2 million in the year to 31 March, compared with a £4.3m loss the previous year.

Flybe has promised to reveal details of how it plans to increase revenues per seat, deliver cost reductions and match capacity to demand.

The rising popularity of pre-paid gift cards is expected to have helped voucher group Park deliver strong full-year results tomorrow.

The group has heavily invested in Flexecash, its pre-paid card system used by major retailers including Argos, Boots, Debenhams, Matalan and Marks & Spencer.

Park has indicated that early sales volumes were ahead in its Christmas savings division. Christmas 2011 delivered sales volumes 5 per cent up on the previous year, and Christmas 2012 is “similarly encouraging”, Park has said, with a 6 per cent jump in orders.

The group reported a traditional first-half pre-tax loss of £5.2m in the six months to 30 September, up on a £4.5m loss in the same period of the previous year – four-fifths of orders go out in the second half of the year that includes Christmas.

Carphone Warehouse has already admitted full-year profits at it European division will be flat amid a slump in its pre-pay mobile phone markets. The UK pre-pay market has fallen up to 40 per cent in the quarter to 31 March, resulting in a 5.5 per cent fall in sales.