Investors look to Marks & Spencer and Sports Direct for Brexit effect
Published 04/07/2016 | 08:03
Brexit concerns will remain at the forefront this week, with retailers Marks & Spencer and Sports Direct International expected to give their views on the impact when they report figures.
Retail giant Marks & Spencer will be looked to for any signs of a Brexit hit on the high street when it updates on trading amid fears over plunging consumer confidence.
As a retail bellwether, the group's shares were hit hard amid the brutal two-day post-Brexit sell-off, falling by 22pc as concerns mounted over the impact on the economy and consumer confidence.
It clawed back some of the ground lost as markets recovered, but investors remain worried over the outlook for UK retail, while Thursday's first quarter figures are expected to reveal further clothing sales woes.
A number of retailers have raised concerns over Brexit, with Carpetright warning it could trigger "uncertainty" among shoppers and online grocer Ocado saying it could send supermarket prices surging as the plunging pound pushes up import costs.
M&S has already been under pressure as sales of its clothing arm have failed to recover and new chief executive Steve Rowe cautioned profits would be knocked by turnaround efforts.
He said on unveiling full-year figures in May that there would be no quick fix in the battle to revive its beleaguered general merchandise business, which saw sales drop 2.9pc over the full-year.
M&S posted a 4.3pc rise in underlying pre-tax profits to £689.6m for the 53 weeks to April 2.
But Mr Rowe's highly-anticipated strategy overhaul received a lukewarm response on the stock market.
He pledged to cut everyday prices for nearly a third of its clothing ranges, while boosting staff numbers on the shop floor.
At the heart of his revamp is a plan to win back ''Mrs M&S'' - its once loyal army of women shoppers aged 50 and over, who he said have been ''neglected'' in recent years.
But he admitted it would take time to turn around clothing sales.
First quarter figures are set to confirm the scale of the challenge, with analysts at Numis Securities expecting general merchandise sales declines to worsen, to a fall of 3pc against 2.7pc in the previous three months.
They said the first quarter will have been knocked by poor weather in April and June, clearance sales at BHS and tough comparisons from a year earlier.
"We believe the long-standing issues in General Merchandise will prove difficult to solve," they said.
Sports Direct will give more details on the hit from the record post-Brexit plunge in the pound when it posts annual figures on Thursday.
The results figures come after an eventful past few months for the group, which has been forced to warn over profits and seen its founder Mike Ashley appear in front of MPs to answer questions on the firm's working practices.
Sports Direct also added to the raft of firms alerting over the impact of Brexit when it warned the pound's plunge against the dollar would take its toll on product buying.
It said it was not hedged against currency movements for the year ahead in an ominous sign for the new financial year.
But it was Mr Ashley's rare turn in the limelight that saw Sports Direct dominate the headlines last month when the Newcastle United owner admitted he paid workers below the minimum wage, also telling MPs that he has discovered ''issues'' with working practices at the retailer as part of an internal review.
Mr Ashley told MPs from the Business Select Committee that HMRC is also probing the firm over wages and that Sports Direct is in talks to offer back pay to staff.
The tycoon pledged to implement a number of changes to working practices within 90 days, promising to write to MPs if the timeframe needs to be extended.
He also raised eyebrows in March after making a startling admission in a newspaper interview that the group was "in trouble", forcing it to send out an alert warning that profits were expected at or around the bottom end of expectations.
This came after it had already trimmed forecasts to between £380m and £420m in January, against £383.2m the previous year.
It will mark a sharp slowdown in profits growth, having previously notched up a 15.7pc surge in annual underlying earnings.
Sports Direct, which runs around 400 stores across the UK, was knocked by poor Christmas trading amid unusually warm weather and Mr Ashley since claimed negative publicity caused by MPs has impacted trading further.