City diary: Week ahead in markets

By THIS IS MONEY
Updated:

 

Inflation figures for November will be the key economic highlight next week, while retailers including Carpetright and Sports Direct International report figures.

Calendar

 

TUESDAY

The Bank of England is unlikely to receive any relief from the stubbornly-high rate of inflation seen in recent months when the latest Consumer Prices Index (CPI) figures are released.

The Bank itself predicted a spike in inflation towards the end of the year in its quarterly forecast as commodity prices continue to soar. Last month, the Office for National Statistics (ONS) said the consumer prices index rose to 3.2% and economists expect the rate to hold firm in November.

But the Bank - which aims to bring inflation down to 2% - has insisted recently that current levels of inflation are down to temporary price shocks, such as food and petrol costs.

Philip Shaw, economist at Investec, predicts the rate of inflation to hold at 3.2% and then increase early next year as a further increase in food costs is expected: 'At 3.2%, October's rate of CPI inflation remains elevated. Admittedly one can identify 'special factors' which are responsible for the prevailing rate remaining so far above the target - excluding VAT and petrol, for example, CPI inflation would be very close to 2%.

'But given the amount of spare capacity and the fact that pay growth is subdued, it feels as though inflation should be much lower and we concur with the MPC in that it should come down below target in early 2012.'

Howard Archer, chief UK and European economist at IHS Global Insight, said upward pressure from food and petrol costs should be balanced by heavy discounting by retailers.

Carpetright reports interim results, having had a difficult start to the year with cautious consumers avoiding spending on big-ticket items.

In its last trading update, the flooring firm warned like-for-like sales were down 7.3% in the UK and Ireland in the 12 weeks to October 23, compared with the 3.4% fall seen at the end of July. Analysts expect the decline in revenues to hit profits, predicted to come in at around £12m, down from £13.9m last year.

The City will be looking for any changes in strategy to pick sales up, particularly after chairman and chief executive Lord Harris of Peckham warned current market conditions are likely to continue into next year.

Premier Inn and Costa Coffee parent Whitbread is expected to continue its positive run this year when it gives its third quarter trading update.

The firm has benefited from a strong performance at its budget hotel brand Premier Inn, which saw like-for-like sales soar 10.1% in the first half of the year.

Whitbread is expected to reveal further plans for expanding the hotel chain, after an advertising campaign fronted by comedian Lenny Henry and a £29 a room offer helped draw in customers. Posted a 28% increase in pre-tax profits of £151m in the six months to September 2, on total revenues of £805m.

The group, which also owns Costa Coffee and restaurants including Brewers Fayre, previously said it was prepared to increase the rate of new hotel openings and is expected to provide further details.

 

WEDNESDAY

SuperDry fashion firm SuperGroup is expected to continue its stellar performance when it announces half-year results.

Shares in the firm, which claims to be one of the fastest growing fashion retailers, have nearly trebled in value since it went public in March on the back of strong trading updates.

Sales at SuperGroup increased by 65.4% to £90.3m in the six months to October 31.

In its most recent quarter it opened a record 14 franchise stores overseas, including its first in the United Arab Emirates, bringing its total to 49.

It also opened eight stores in the UK, bringing its total to 59 and opened a further 13 concessions in House of Fraser bringing the total up to 69.

Investors are hoping the group can carry on last year's strong performance when it increased pre-tax profits by 196% to £22.5m in the year to May 2.

The business started life on a market stall in Cheltenham more than 20 years ago, but floated nearly a third of the business in March to fund growth - triggering a huge windfall for directors including founder Julian Dunkerton.

 
THURSDAY

Sports Direct International expects to report a jump in profits, but has been cautious about its outlook.

Controlled by Mike Ashley, the owner of Newcastle FC - the firm saw a boost from the World Cup in the first quarter continue into the second as group sales lifted 5.4% to £295m in the nine weeks to September 26.

But the owner of Sports World stores and brands including Slazenger and Donnay has warned that it expects the early months of 2011 to be 'extremely challenging'.

Katharine Wynne, analyst at Investec Securities, said: 'The company is rightly very cautious about the fourth quarter, when the combination of VAT increases, new season price increases and lack of sports spending catalysts may all offset the benefit of soft comparisons.'

The City will be looking for any signs that the company plans to capitalise on the poor performance at rival JJB Sports.

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