Upcoming trading updates to present retail mood

The state of the UK’s retail sector will become a little clearer this week when three of the major high-street players, WH Smith (LON:SMWH), Home Retail Group (LON:HOME) and Halfords (LON:HFD), all release trading updates.

Home Retail Group, the parent firm of Homebase and Argos, is due to release its first quarter trading update later this week. Thursday’s results will give the first impression of how the group’s two retailers are coping after the company said in its final year results statement in April that it was bracing itself for a difficult year for the retail industry.

Despite the caution, Home Retail Group saw sales improve by two per cent at its Argos and Homebase stores last year. However, Homebase’s closest rival B&Q said it had seen a fall in sales in the first quarter of the year due to the poor weather conditions. Kingfisher (LON:KGF), parent group of B&Q, released results last Thursday grumbling that the freezing winter conditions hit outdoor product sales – issues that may not hamper Home Retail Group for the three months beginning in April.

One retail group that has made the most of the adverse weather conditions has been Halfords. Analysts are expecting a 25 per cent hike in annual profits in the end-of-year results on Thursday as the poor weather forced motorists to spend more on car maintenance. In the 11 weeks to March 19, the group said it had its record quarter trading for fitting headlight bulbs, windscreen wipers and batteries offsetting the poor retail performance of its leisure department that includes bicycles and satellite navigation systems.

Also due to release quarterly results information this week is WH Smith. Experts have predicted a sharp underperformance from the retailer with the 135 airport stores making the biggest losses thanks to the Icelandic ash cloud cancelling flights and closing airports through April and May. On top of that, the group is also battling against a recent survey report from consumer watchdog Which? which placed WH Smith at the bottom of 100 retailers reviewed in relation to store prices, product range and customer service - which could be related to the firm’s spending cut backs that have impressed investors recently.

All three sets of results will be released just days after the British Retail Consortium appealed to the UK Government not to raise the VAT rate as it would have ‘negative impacts on retailing and the wider economy’. The BRC statement said the VAT rate shouldn’t be extended to exempted items like food, books and children’s clothing as it would hit the most vulnerable members of society. The VAT increase, which may come about as part of the emergency budget announcement on June 22 to raise £24bn, would be a huge deterrent for investors some analysts are predicting.

At midday BST both Home Retail Group and Halfords Group are down 0.4 per cent while WH Smith is 2.77 per cent up with a gain of more than 12p.

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