A flood of news from retailers today, with Dixons Carphone leading the pack in terms of underlying sales growth. The wider market was down nearly 1 per cent in morning trading.
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Home Retail Group (HOME) continues to battle with weak sales of electrical goods at Argos. August was also a weak month, dragging second-quarter sales down by 2.8 per cent like for like, though this was somewhat offset by the launch of Argos concessions in Homebase (the group's other business) and Sainsbury's. The shares fell 5 per cent; investors may also have been discouraged by management comments about Christmas being "less predictable than usual due to a less certain promotional environment". Our recommendation is under review.
Dixons Carphone (DC.) saw none of the weakness in the electricals market that is dogging Argos in the 13 weeks to 1 August. UK and Irish like-for-like sales were up an astonishing 10 per cent, which the company attributed to significant market share gains in phone sales. Management made a point of noting "growth in UK electricals". The shares rose 2 per cent in morning trading. Buy.
Ricardo (RCDO) posted solid numbers for the year to 30 June, which marks the Shoreham-based engineering consultancy's centenary. Strip out acquisitions and pre-tax profits rose 8 per cent to £26.8m as a result of strong order intake in the technical consulting division, particularly in Asia. Investors may be slightly disappointed by an order book of £140m - slightly below last year's level - but we remain convinced by the long-term story. Buy.
Dunelm (DNLM) managed to grow like-for-like sales both in-store and online - no mean feat for a retailer. Like-for-like sales were up 5.8 per cent overall as in-store sales finished the year up 3.4 per cent and digital growth hit 55 per cent to account for 6.1 per cent of the total. The company now has 149 stores, with seven more contractually committed (excluding relocations). The only weak point was some slippage in margins at both the gross and operating level. Buy.
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Wm Morrison (MRW) posted its first financial results since David Potts took over as chief executive in March with a mandate to turn the embattled supermarket group around. Like-for-like sales fell 2.4 per cent in the second quarter, better than the 2.9 per cent decline in the first quarter, but these numbers may be overshadowed by news of costly supermarket sales and closures. The sale of the vast bulk of the loss-making convenience store portfolio was announced yesterday, with a £30m loss on disposal, and the closure of 11 supermarkets was announced today - on top of the 10 closed in the first half.
Next (NXT) dedicated a surprising amount of its half-year statement to the effect of the new minimum wage on the economics of its business. It estimates the cost next year at £2m, and £27m beyond. Otherwise, trading has followed the familiar pattern of booming online ('directory') sales - up 8.2 per cent - and sagging growth in the retail estate (up 0.2 per cent, with a 2.2 percentage point contribution from new stores implying negative like-for-like growth). But investors were cheered by stronger margins.
OTHER COMPANY NEWS:
M&C Saatchi (SAA), the advertising agency set up by the eponymous brothers after they were forced to leave Saatchi & Saatchi, reported constant-currency sales growth of 9 per cent for the first half. The UK business, which accounts for nearly half of total sales, experienced a "favourable run of account wins", including Airbus, Carnival and Royal Mail.
Unlike its UK peers, French electricals retailer Darty (DRTY) was helped by sunny summer weather. Strip out Mistergooddeal - a loss-making online discount business purchased by Darty in 2014 - and like-for-like sales in France rose 1.1 per cent in the first quarter to 31 July. The Benelux business is still struggling, however, and Mistergooddeal is a big drag on sales as well as profits.
