Halfords set to reveal sales woe as Booker highlights strength

BICYCLES to car repair firm Halfords and wholesaler Booker provide the focus for the City next week, while purchasing managers’ surveys will provide an insight into the health of the UK economy.

The mild weather and record fuel prices will spell more sales woe for Halfords when it updates the market on Thursday.

Petrol prices earlier this month broke through the £1.40 barrier for the first time, forcing people to use their cars less and cut back on car-maintenance products, while sales of de-icer and windscreen scrapers will suffer from the warm weather.

The group recently said sales of jerry cans rose by six times at the end of March amid fears that a tanker drivers’ strike would create petrol shortages, but this is not expected to have a big impact on its results.

However, the chain, which operates 467 stores, is set to benefit from more strong bike sales after the recent success of British cycling that has seen Mark Cavendish crowned world champion.

The chain’s shares have fallen by about 40% over the past couple of years as weak trading and availability problems triggered a profits warning.

When Halfords last updated the market, it said like-for-like sales fell 4.8% in the 13 weeks to December 30, with car maintenance and enhancement products down 12.8%.

The City expects the group to report further sales declines of 1.7% in the three months to the end of March but Jonathan Pritchard, an analyst at Oriel Securities, believes a decline of 3.2% is more likely.

Pasta and pizza chain Prezzo should unveil higher profits as it managed to tempt consumers with online offers and maintained its expansion drive.

The group, which has more than 170 outlets in the UK, is expected to reveal profits of £16.1 million for 2011, compared to £14.2m the previous year, a rise of 14%.

The UK’S biggest cash-andcarry wholesaler is set to reveal another strong performance on Thursday as its convenience store customers benefit as people increasingly top-up at nearby shops.

Booker, which has 172 branches and supplies nearly half-a-million businesses including corner shops, pubs and restaurants, reported a 7% rise in sales in the 16 weeks to December 30 when it last updated the market, outperforming most supermarkets.

The Northamptonshire-based firm is expected to report more strong trading as its independent retailer customers continue to benefit as high petrol prices force people to drive less regularly to supermarkets and topup more at local shops.

Booker, which also supplies customers including Marks & Spencer, HMV, WH Smith’s shops in transport hubs and Odeon cinemas, has seen its share price quadruple in the past three years after chief executive Charles Wilson turned the business around.

Meanwhile, the group has also branched out into India, recently opening its fourth depot and has significant growth for further expansion.

Franklin Walding, an analyst at Goldman Sachs, recently started advising clients to buy Booker shares. He expects the company to report a 16% rise in operating profits to £89.1 million in the year to the end of March.

A round of economic surveys from the manufacturing, construction and services sectors released next week will give a clearer picture of whether the UK avoided recession in the first quarter of the year.

The Markit/cips purchasing managers’ surveys for March come after the Organisation for Economic Co-operation and Development (OECD) said the UK economy shrank in the first three months of the year, following a 0.3% contraction in the final quarter of 2011.

However, the OECD forecasts did contradict many economists’ predictions, after previous Purchasing Managers’ Index (PMI) surveys showed modest growth in the manufacturing industry and powerhouse services sector in January and February.

Meanwhile, muted economic activity in the eurozone is hitting the industry’s export orders, although this is being countered by higher demand in Asia and the US.

The construction sector hit an 11-month high on the index of February with a reading of 54.3 and is expected to once again show growth but at a more moderate pace on Tuesday.

The sector has been surprisingly resilient, boosted by housebuilding and civil engineering contracts but economists have warned the outlook is fragile.

The services sector rounds off the PMI line-up on Wednesday and is similarly expected to show easing growth, as it remains above the critical 50 reading but pulls back from February’s 53.7.

The surveys come after official figures revealed the economy contracted by 0.3% in the final quarter of 2011, worse thanexpected. It is generally agreed UK growth will be feeble for the first half of 2012, although falling inflation should increasingly deliver a boost to consumer spending as the year progresses.