High street’s troubles in focus as big names report

Morrisons, which operates some 450 outlets, should provide some insight into how consumers are reacting to higher grocery prices when it updates the market on Thursday.

The cost of food was 6.2 per cent higher in July than a year ago, according to official figures, while alcohol and tobacco were up 10.3 per cent.

With shoppers’ budgets being squeezed as wages fail to keep pace with the rising cost of living, supermarkets are having to fight hard for trade, with special offers and price cuts squeezing their margins.

Morrisons is expected to reveal pre-tax profits up 7 per cent to £440 million in the half year to 1 August, according to Philip Dorgan, an analyst at Panmure Gordon. He expects like-for-like sales to have risen 1.9 per cent, boosted by food price inflation.

Argos and Homebase owner Home Retail Group and Currys and PC World parent Dixons Retail will do nothing to alleviate concerns over the state of high street trading when they both update the market.

Analysts will be looking for news on how both businesses were impacted by the riots which rocked England last month after looters targeted consumer electronics chains across London, Manchester and Birmingham.

Catalogue chain Argos is expected to reveal a 9 per cent drop in like-for-like sales in the three months to June, brokerage Seymour Pierce said, while garden and homewares store Homebase is forecast to show a 3 per cent drop in same-store sales.

Argos, which has about 750 stores in the UK, had a poor start to the financial year with declining same-store sales, driven by poor demand for consumer electronics, including televisions and video gaming.

Dixons Retail is expected to report a 13 per cent decline in like-for-like sales in its first quarter to July, according to consensus figures. The wider group, which operates in 26 countries, is forecast to show an 8 per cent drop in like-for-like sales.

Meanwhile, chocolatier Thorntons will reveal on Wednesday whether there has been any let-up in the poor trading that has forced it to hatch a turnaround plan.

The retailer, which is forecast to reveal a £3.2m pre-tax loss in the year to June, said it will close up to 180 stores following a strategy review led by its new chief executive Jonathan Hart.

It has suffered in recent years from increased competition from supermarkets and reduced footfall at its high street stores amid the squeeze in consumer spending.

Housebuilder Redrow is expected to reveal that its recovery since founder Steve Morgan returned to the helm has continued.

Morgan, owner of Wolverhampton Wanderers Football Club, has revived the company in the last two years by altering its strategy to build more family homes to reduce the company’s exposure to first-time buyers struggling to get mortgages.

He has also focused the firm’s efforts on the south-east of England, where the market has been more resilient.

The strategy is expected to help the company report an 11 per cent increase in revenues to £441.6m in the year to the end of June, while pre-tax profits are expected to leap to £18.3m from £700,000.

Pub chain JD Wetherspoon will disclose on Friday whether its recent slowdown in sales growth has worsened amid the economic gloom.

When it last updated the market in July it said like-for-like sales increased by 1.6 per cent in the 11 weeks to 10 July, down on the 2.2 per cent growth in the 50 weeks to the same date, as consumers rein in spending.

However, it said it hoped to report a “reasonable” outcome for the year after being encouraged by the performance of the 38 pubs it opened in the period, bringing its total to more than 800.

But pre-tax profits are expected to fall 6 per cent to £66.5m as its margins are squeezed as it struggles to pass rising prices on to cash-strapped consumers.