Sainsbury's looks set to outshine larger rival

Retailers will be back in the spotlight this week as Tesco and Sainsbury's are due to publish trading updates while final results will be published by Currys owner DSG International.

Retailers will be back in the spotlight this week as Tesco and Sainsbury's are due to publish trading updates while final results will be published by Currys owner DSG International.

Tesco and Sainsbury's will square up this week as the two retail giants produce first quarter trading updates.

First up is Tesco tomorrow (Tuesday) as the UK's biggest supermarket chain is expected to unveil like-for-like sales growth excluding fuel of between 5% and 5.5%.

But Shore Capital analyst Clive Black is expecting Sainsbury's to outshine its larger rival a day later, with like-for-like sales touching 6%, as competitors begin to mount a sterner challenge to Tesco's dominance.

He said: "Tesco has been shooting the lights consistently in recent years but Sainsbury's and Asda have been regrouping, and this has to have an impact on how Tesco can grow."

The latest figures from research firm TNS Worldpanel bear this out, with Sainsbury's showing year on year growth of 8% in the 12 weeks to May 20 compared with a marginally lower 7% increase at Tesco.

Both companies are expected to comfortably outperform Morrisons, which presented unspectacular like-for-like sales growth of 4% in the 15 weeks to May 20 three weeks ago.

Mr Black said UK growth avenues for Tesco include non-food offerings and its formidable online presence, with longer-term overseas opportunities presented by China, Japan and the US where stores are opening later this year.

But Sainsbury's is also gearing up for growth with plans for another 30 supermarkets and 100 convenience stores by March 2010, unveiled along with a 42% rise in underlying operating profits to £380m last month.

Both companies have been on opposite sides of takeover activity. A private equity consortium led by CVC failed in a £10.1bn bid for the business in April, but speculation resurfaced this week after further stakebuilding from Qatari investment fund Delta Two.

Attention on Currys owner DSG International will shift back to the company's results on Wednesday after the recent focus on the departure of long-serving chief executive John Clare. But his last set of results after 13 years at the helm of the business are expected to reflect difficult markets in the firm's overseas operations.

Oddo Securities predicts that trading in Europe - particularly in its Italian UniEuro operation - will see pre-tax profits fall more than 9% to £292m despite a better like-for-like performance from the UK business.

This year DSG has also had problems in France, after pulling the plug on PC World and recently uncovering a "significant fraud" at its French online business Fotovista, which is set to cost the group about £10m.

Also this week, confectionery and drinks giant Cadbury Schweppes is expected to outline plans of a £300m austerity drive in a trading update tomorrow. (Tuesday)

Todd Stitzer, the chief executive of the Dairy Milk maker, is reportedly considering a fresh round of factory closures and job cuts at the global group, which is based in Bournville, near Birmingham. The firm will also update on the proposed separation of its £8bn US drinks business, which makes Dr Pepper and 7-Up. Mr Stitzer said earlier this year that Cadbury would look at ways split the operation from the confectionery division, fuelling expectations of a return to cash to shareholders. It is likely that Cadbury has already received offers for the US business.

The group sold another batch of businesses earlier this month and aims to raise £250 million from disposals by the end of the year.

Investors will be scanning mortgage giant Bradford & Bingley's trading update on Thursday for signs of a potential slowdown in its key buy-to-let business.

Record levels of lending helped the firm post an 8% rise in profits for 2006, with 20% growth in B&B's buy-to-let business pushing its performance beyond analysts' expectations.

The firm's other specialist business, self-certified mortgages, also grew by 46%, outstripping mainstream mortgage growth.

But four increases in interest rates since last August are likely to take an increasing toll on the business with chief executive Steven Crawshaw saying in April that higher borrowing costs were "beginning to dampen demand".

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