Market Watch: Premier Inn has room for further sales growth

THE owners of electrical chains Comet and Currys post results this week following another tough year for the consumer, while Whitbread – which owns Premier Inn and Costa Coffee – gives the latest snapshot from the leisure sector.

Kesa Electricals, which controls the Comet chain, will move back into the black in full-year results on Wednesday, even though UK sales remain in the doldrums.

The company has already flagged up pre-tax profits of 76 million for the year to 30 April – up from losses of 81.8m the previous year – so attention in the City will be on the outlook.

Companies from housebuilders to supermarkets have reported signs of consumer caution – and Kesa may also be faced with a VAT hike when it reports following Chancellor George Osborne's emergency Budget on Tuesday.

The sales picture is already tough as like-for-like revenues at Comet were down 4 per cent between January and 30 April, and fell by 1.2 per cent across the group – although Kesa faced headwinds from January's blizzards, which knocked around two percentage points from the figure.

Kesa stressed that Comet both held its market share and improved its gross margins in the UK, while its Darty business in France also showed positive like-for-like growth.

Results on Thursday from DSG International – which owns Currys and PC World – should offer more evidence of the turnaround under former Tesco director John Browett.

Browett took over at the worst possible time in late 2007 but has steered the business through a savage recession and put the firm's balance sheet in order with a cash call on shareholders.

Now two thirds of the way through a three-year revival plan, the group's last trading update showed the benefits of the shake-up, with underlying like-for-like sales up 6 per cent in the second half of its financial year.

DSG said all parts of the businesses have performed well across the UK, Spain, Italy and Nordic markets.

Its new-format stores are meanwhile delivering consistently higher profits, especially megastores and the two-in-one PC World and Currys outlets across the group.

Football fans buying new televisions ahead of the World Cup are also likely to have provided a recent sales boost, although the group is understandably cautious about consumer confidence going forward.

DSG's underlying pre-tax profits are likely to be in line with the 80m-90m expected by the market, up from 50.5m the previous year.

Costa Coffee was the star of the show when leisure group Whitbread last updated the market, but analysts expect further signs of momentum from budget hotel chain Premier Inn in Tuesday's trading statement.

Premier Inn returned to like-for-like sales growth in the final quarter of the last financial year – helped by a campaign fronted by comedian and actor Lenny Henny and the impact of "dynamic pricing", where rooms are priced according to demand.

Rival Travelodge has recently launched its own campaign – featuring soft toys Mr Sleep and the Zzz Squad – but Numis analyst Douglas Jack said Whitbread was "strongly positioned to outperform in the short term".

Week ahead

TOMORROW

Eckoh (finals)

TUESDAY

Whitbread (update)

WEDNESDAY

Falkland Islands Holdings, Kesa Electricals, Stagecoach (finals)

THURSDAY

DSG International, DS Smith (finals); Go-Ahead (update)

FRIDAY

Berkeley (finals)