Next and Morrisons set to announce half-year profits
Two retail heavyweights will shed light on their trading next week, with Next and Morrisons updating the market on their half-year performances as the dust begins to settle following Britain's decision to quit the European Union.
Further insight into retail and consumer confidence after the Brexit vote will be given on Thursday when high street giant Next posts its half-year profits.
The chain has been gloomy on retail prospects in recent months, warning of a consumer spending shift away from clothing and last month alerting over possible price hikes to combat the falling pound.
But chief executive Lord Wolfson has so far said there has been no clear evidence of a worsening in trading directly as a result of the referendum decision.
In an update last month, Next surprised the market with a better-than-feared second quarter performance, with a robust end-of-season sale helping limit the fall in total high street store sales, including markdowns, to 0.7%.
Full-price sales at its high street stores fell 3.3%, but its Next Directory arm saw sales rise 5.7%.
This helped it to nudge up its full-year profit forecast, to a mid-point of £810 million from the £800 million previously guided.
But it cautioned over a future hit from the pound's weakness since the Brexit vote, saying it could push up costs of importing clothes from overseas suppliers by as much as 5%.
This would likely be passed on to shoppers in higher price tags, Lord Wolfson revealed.
Its half-year results will show a 5% drop in interim pre-tax profits to around £330 million, according to analysts at Numis Securities.
The market will be keen for further updates on trends in consumer spending, with mixed signals on how well confidence has held up.
Next has already said it expects sales to worsen in a ''particularly challenging'' third quarter as it also comes up against tough comparisons from a year earlier, although the all-important Christmas season may see some improvement after mild weather hit the end of 2015/2016.
Morrisons is expected to notch up its third consecutive quarter of like-for-like sales growth next week as the supermarket continues its turnaround under chief executive David Potts.
Analysts at Barclays estimate that like-for-like sales will grow 1.1% for the second quarter, with underlying pre-tax profits also set to rise from £117 million to £150 million in the first half.
James Anstead, analyst at Barclays, said: "The company has clearly outperformed sales expectations and may well be the strongest of the big four in like-for-like terms in the first half."
The firm, which is embroiled in a bitter grocery price war, last week revealed that it is slashing selected meat and poultry prices by 12%.
All of the so-called big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - have been cutting prices in a bid to better compete with German upstarts Aldi and Lidl, who have eroded their market share.
But David McCarthy, analyst at HSBC, said Morrisons' price cuts "make sense".
He said: "Morrisons can step up output relatively quickly and at a lower cost than most of its competitors so it makes sense to cut prices in areas where it has these advantages. Morrisons continues to play a very smart game."
The Bradford-based group's resurgence comes after Mr Potts took the helm last year, following the removal of former boss Dalton Philips, and embarked on a number of changes in a bid to turn around the firm's fortunes.
The chief executive has this year inked a new deal with Ocado and signed a landmark agreement with US online giant Amazon to supply fresh food to its customers.
Mr Anstead added that Morrisons has "sharpened up commercially" under Mr Potts.
Experts expect Asda to be the next major player to pull the trigger on price cuts following Morrisons' efforts.