High street chains to issue updates

M&S storeThe retail sector will come under the spotlight this week when Marks & Spencer, Mothercare and Burberry will update on how they are coping in tough economic conditions.

High street bellwether Marks & Spencer will suffer its first fall in annual profits for three years on Tuesday as the squeeze in its customers' living standards hits home. Profits had smashed through the £1 billion barrier for the first time in a decade in 2008 but the financial crisis hurt shoppers and heralded an era of fierce discounting on the high street.
In that time, the UK's biggest clothes retailer has come under pressure from the success of budget retailer Primark while Next has grown sales online to make up for a fall in store sales. Its food sales are competing against fierce discounting in the supermarkets, prompting it to launch a new 500-strong Simply M&S value range to appeal to austerity Britain.

The group, which has more than 700 stores in the UK, will report a 3% fall in pre-tax profits to £694 million in the year to the end of March, according to City forecasts.

Meanwhile, more details on the rescue plan for Mothercare's UK operation will be unveiled on Thursday when new chief executive Simon Calver presents full-year results. Mr Calver joined Mothercare at the end of April from internet movie rental company Lovefilm and is expected to endorse the transformation strategy announced by executive chairman Alan Parker last month.

Alongside a drive for more online business and continued overseas expansion, Mr Parker revealed plans to cut the number of stores in the UK from 311 to a core 200 profitable stores by 2015. It follows months of weak trade, including a 9.5% drop in like-for-like sales in the 12 weeks to March 31.

In contrast, Angela Ahrendts' star will continue to shine on Wednesday when luxury goods group Burberry reports that profits have risen by a quarter.

The brand, famous for its red, black and camel-coloured check design, has remained resilient in the face of the worsening global economy, helped by strong demand in key markets including the UK, France and China. Under the leadership of chief executive Ms Ahrendts and creative director Christopher Bailey, the group has tapped into demand from well-heeled travellers for high-end British fashion.

Burberry recently allayed fears that the slowdown in China would hurt its growth when it reported that sales from its retail estate, which includes 192 shops and 208 concessions, rose 23% to £743 million in the six months to March 31.

As well as sales of traditional Burberry favourites such as jackets and handbags, the company reported strong growth in knitwear, men's tailoring and accessories, fragrances and watches. The City expects profits for the year of about £376 million, compared to £298 million a year ago.

© 2012 Press Association
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