Thursday preview: Kingfisher, Next, retail sales

With the hoo-hah over the Budget behind us, attention reverts to corporate matters, with retailers in focus on Thursday.

Do-it-yourself (DIY) retail giant Kingfisher is due to report full year results. Market expectations are for pre-tax profit of £801.9m on sales of £10.8bn. Earnings per share (EPS) are tipped to rise to 24.73p and a full year dividend of 8.44p has been pencilled in.

Credit Suisse expects the results to demonstrate the ongoing benefits of internal self-help - market code for cost cutting - and market share gains, despite a challenging trading environment.

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As Credit Suisse notes, Kingfisher has already reported fourth quarter like-for-like (LFL) sales growth (year-on-year, or yoy) of +4.2% for France, -1.9% for UK & Ireland, and +0.1% for "Other International".

"For the full year we forecast French EBIT [earnings before interest and tax] growth of 22% to £425m with EBIT margins increasing by 120bp [1.2 percentage points] to 9.5% for the year underpinned by a strong LFL performance (+3.8%) and gross margin gains. For the UK & Ireland business we forecast EBIT of £260m (+7% yoy) with EBIT margins increasing by 40bp to 6.0% despite £3m of additional costs associated with the accelerated roll out of Screwfix," Credit Suisse said.

"For Other International, we forecast EBIT of £187m vs £171m in the prior year with improvements within profitability from Spain and Russia with break even position for China but Poland EBIT down 4% yoy (LFLs were +1.4% for the full year)," Credit Suise added.

"We expect management will also give further details on the next phase of its development ('Creating the Leader') focusing around self-help initiatives to drive sales, margin and cost productivity as management progresses towards its 2013/14E stretch EPS target of 31.2p," Credit Suisse predicted.

Stockbroker Jefferies reckons that "France may represent a source of near term concern (2011 French DIY spend +3% is a tough basis at a time when the tackling of the budget deficit is likely to become more vigorous post Presidential elections), but longer term investors will find comfort in the extent to which self-help can continue to drive the group."

Elsewhere in the retail sector, fashion retailer Next is forecast to announce full year pre-tax profit of £566.3m on sales of £3.4bn.

"Within the detail: We forecast Next Retail EBIT of £315m (vs £329m in the prior year) where we are assuming a drop in operating margins of 30bp given the negative LFL sales evolution although we expect overall markdowns to be in control and forecast gross margins up 25bp (flat in H2 [second half]). We expect Next Directory to post a strong profit performance and forecast EBIT of £257m vs £222m in the prior year with operating margins increasing by 30bp to 24%," Credit Suisse said.

"We expect Next to give more colour on its 2012/13 outlook," the broker added.

Panmure Gordon, meanwhile, gets all technical, moving into the weather forecast business.

"Our inspection of met office [Meteorological Office] weather trends from the past 12 months (which, for example, show that October and November 2011 temperatures were 2-3% higher than average, that July 2011 temperatures were 1% lower than average and that August 2011 was 20% less sunny than normal) corroborate clothing retailers' claims that 2011 weather made a tough year even more difficult," the broker said, as it suggested that the retailer may benefit from more normal weather patterns in 2012.

On more mundane business matters, Panmure Gordon notes, "The company was due to begin selling online in Japan, China and Russia in H2 [second half] 2012. We will be very interested to hear further detail on this rapidly growing part of the Directory business."

Peel Hunt, meanwhile, says that "while short-term trading is unlikely to be anything to be excited about, scope for recovery in calendar 2013 has started to bring renewed enthusiasm for the retail sector over the past few weeks. Management always paint a clear picture of how it sees trading, the economic backdrop and the outlook for both Next and the retail sector as a whole. If the sector is to continue its recent rally, management will need to put forward a more optimistic assessment than that in January."

Turning to the economy, Barclays Capital expects a fall in UK retail sales for February after two strong months. "We forecast the headline measure to fall by 0.4% m/m [month on month] from 0.9% previously and the core measure to fall by 0.5% m/m from 1.2% previously," the investment bank said.

INTERIMS

Evocutis

INTERIM DIVIDEND PAYMENT DATE

BHP Billiton

QUARTERLY PAYMENT DATE

Royal Dutch Shell 'A', Royal Dutch Shell 'B', Total SA, Unilever, Virgin Media Inc.

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Bloomberg Consumer Confidence (US) (13:45)

Consumer Confidence Indicator (EU) (10:00)

Continuing Claims (US) (12:30)

House Price Index (US) (14:00)

Industrial New Orders (EU) (10:00)

Initial Jobless Claims (US) (12:30)

Leading Indicators (US) (14:00)

GMS

Aqua Bounty Technologies Inc. (Reg S)

FINALS

Alliance Pharma, APR Energy, BrainJuicer Group, Cyprotex, Delcam, EG Solutions, Kingfisher, Next, Portmeirion Group, Premier Oil, Scisys, Signet Jewelers Ltd., Skyepharma, Sopheon, Sphere Medical Holding, Trap Oil Group, Tribal Group

EGMS

Hellenic Telecom Industries SA ADS

AGMS

Iona Environmental VCT 'A' Shares, Jarvis Securities, Throgmorton Trust

TRADING ANNOUNCEMENTS

United Utilities Group

UK ECONOMIC ANNOUNCEMENTS

Internet Retail Sales (09:30)

Retail Sales (09:30)

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