Mindful Money’s weekly shares watch: Morrison, Barratt Developments, Home Retail Group & Burberry

12th January 2015


Less than a week after Tesco revealed its substantial cost-cutting measures, investors are set to get more news on the UK’s troubled supermarket sector as Tuesday sees Morrison deliver its Christmas trading update.

Over the past 12 months the FTSE 100 retailer’s shares have plummeted by 25% chiefly on the back of stiffer competition across the industry.  However during the last three months they have rebounded by 14% but even so, ahead of the update analyst consensus opinion currently points towards a ‘hold’.

Keith Bowman, equity analyst at Hargreaves Lansdown highlights that a decline in like-for-like sales in the region of 3% to 4% is forecast, with the fall in same store sales last Christmas of over 5% making for an easier comparative than rivals.

Sheridan Admans, investment research manager at The Share Centre, who has the stock on his ‘hold’ list, says: “Like Tesco’s and Sainsbury, Morrison’s will be hoping that its Christmas trading period wasn’t as bad as feared. However, having the least diversified business model of the three it is likely to have found the period a struggle.”

Bowman adds: “The group’s ongoing rollout of convenience stores may receive an update, whilst its previously detailed cost saving programme could be further referenced.”

Wednesday sees homebuilder Barratt Developments, up 14% over three months, publish its second quarter trading update.

Last year was a winning year for house builders with many companies in the sector reporting double-digit increase in sales. Despite any cooling in the property market, sentiment is buoyant, as the group’s shares remain in ‘buy’ territory, according to Digital Look.

But Admans, is less bullish and calling the business a ‘hold’. He says: “Investors should expect strong sales numbers from the company for 2014 as house sales increase, along with house prices. Investors will look out for the prospects in 2015 and as a result, forward sales as well as plot and land bank acquisition numbers will be sought after.”

The group has also suggested that shareholder returns will be boosted as the group’s cash position improves, notes Admans, so any further information on timing and amounts will be worth noting.

Luxury clothes group, Burberry also updates the market on Wednesday, with its latest interim management statement.

The designer, famous for its check designs has enjoyed a 12% share price rise over both one year and three months, and the stock remains in ‘buy’ territory. The new CEO, Christopher Bailey, has had a bit more time to settle in and so far investors seem to be happy given rise in its shares, says Admans, who has the firm on his ‘buy’ list.

He adds: “Despite the weak global economic backdrop, trading updates over the last year have been optimistic. Investors will be interested to see the trading numbers for the crucial holiday period sales and should expect good online sales numbers as a result of recent heavy investment into the group’s online platform. However, the slowing Chinese economy and the Eurozone could potentially turn the trading update sour.”

Argos and Homebase owner Home Retail Group is expected to provide its third quarter trading update on Thursday. Tougher year-over-year sales comparatives provide the backdrop for firm, which nonetheless has seen its shares jump by 33% over three months.

Bowman says: “Electrical sales at Argos remain a core component. Guidance on full year profitability heads the agenda for investors, with management last year upgrading its expectation. Prior to the update, analyst consensus opinion currently points towards a ‘hold’.”

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