Market Watch: City focus falls on Reckitt Benckiser

FIRST quarter figures from household goods giant Reckitt Benckiser will put the firm back in the spotlight on Wednesday following recent shock news that its chief is to retire, while results from Tesco and Argos owner Home Retail Group are likely to show further evidence of high street gloom.

Reckitt's shares slumped 7 per cent last week after it revealed that chief executive Bart Becht is to stand down in September. He will be succeeded by 25-year Reckitt veteran Rakesh Kapoor, but news of the change took investors by surprise.

In terms of the first quarter update, analysts at Royal Bank of Scotland are forecasting 3.5 per cent underlying sales growth in the consumer business, with flat sales in Europe and North America balanced by 14 per cent growth in developing markets. Soaring commodity prices are also likely to put further pressure on profit margins.

Reckitt was able to increase 2010 profits by 13 per cent thanks to the developing markets performance and said it was targeting further sales and profits growth in 2011, although at a reduced pace due to a tough global economic backdrop.

Home Retail Group is expected to add to the gloom surrounding high street sales when it reveals its full-year results on Wednesday.

Management expects pre-tax profits for the year ending February to come in at between 250 million to 255m, down around 14 per cent on the previous financial year.

Argos saw like-for-like sales drop 5.6 per cent in the year, while Homebase saw same-store sales fall 0.3 per cent.

The City will also be looking for updates on where the company sees costs heading after the firm warned that cost inflation and investment in long-term initiatives means overheads are likely to be moderately higher this year.

There will be more evidence of the difficulties facing the high street on Thursday when the Office for National Statistics releases retail sales figures for March. Sales are expected to have declined as inflation and economic uncertainty continue to weigh on consumer sentiment.

Fashion group Burberry has consistently bucked the trend and is expected to report more growth when it updates investors on Tuesday.

But the City will be interested in the effect of the recent Japanese earthquake and associated disasters, as the Asian nation accounts for about 18 per cent of Burberry's operating profits.

The group's trading update for the first quarter of 2011 is unlikely to be significantly impacted, but the company will be pushed for details on trading since the disaster.