A flurry of British retail and consumer goods companies lifted profit forecasts on Thursday, adding to hopes of economic recovery, though many continue to bear the scars of the downturn and remain cautious about 2010.
Builders' and home improvements supplier Travis Perkins, car dealer Inchcape, TV and internet shopping group Ideal Shopping Direct and McBride, which makes own-brand household goods for retailers, all said they expected to beat analysts' previous consensus profit forecasts.
But their outperformance was driven as much by cost cutting as by improving sales trends.
JJB Sports, which narrowly avoided administration earlier this year, also said trade was improving, though it warned a full recovery would take time.
Britain has lagged other major economies in emerging from recession, but recent data suggest a return to growth in the fourth quarter of 2009 and that consumer spending is picking up heading into the key Christmas trading period.
However, British non-food retail stocks have surged around 70 percent this year and some analysts think this does not factor in the risk that spending might slow again in 2010, when the government is likely to hike taxes to cut borrowing.
"The market is anticipating (profit) upgrades and so performances will need to be exceptional," said Shore Capital analyst Kate Calvert of the Christmas trading period.
She thought industry conditions would remain tough in 2010, though retailers could be helped by a firmer pound, low inflation and more self-help measures like cost cutting.
Britain will publish retail sales figures for November at 0930 GMT, while the Confederation of British Industry will release a retail survey for December at 1100 GMT.
RAISING HOPES
Travis Perkins, which runs the Wickes home improvement chain, was typical of the sector, reporting that a mix of improving sales trends and cost cutting would help it to deliver 2009 earnings at the upper end of forecasts.
It also remained cautious about the future.
"Given the probable pressures on both consumer and trade spending … our outlook for 2010 remains unchanged," it said, adding it did not expect analysts to lift profit forecasts for next year.
Inchcape, which sells and distributes cars for manufacturers including BMW, Honda and Toyota in 26 countries, delivered a similar dose of outperformance tempered with caution.
While saying its fourth-quarter performance was "slightly ahead" of expectations, it stuck to its view that a global car industry recovery would not start until well into the second half of next year.
McBride, which makes household and personal care products for retailers like Tesco and Carrefour, has fared better in the downturn as shoppers have switched from brands to cheaper own-label goods to save money.
But it also cited tight cost control as a key factor in its forecast that first-half operating profit would beat analysts' expectations.
At 0835 GMT, Travis Perkins shares were down 0.7 percent at 808.5 pence, Inchcape up 2.2 percent at 28.7 pence, McBride up 0.9 percent at 212.1 pence and Ideal Shopping up 6.9 percent at 109 pence.
LONG RECOVERY
JJB Sports has had a much tougher time and earlier this year looked to be joining retail victims of the recession, which have included toys-to-DVDs chain Woolworths, furniture store MFI and more recently bookstore Borders UK and Threshers off-licences.
JJB survived by striking a deal with creditors, mainly landlords, in April and then raising 100 million pounds in a share sale in October to support a turnaround plan, which includes focusing more on major brands like Nike and Adidas.
The group said underlying sales trends and stock levels were improving.
But with sales at stores open at least a year down 29 percent in the 20 weeks to Dec. 13 and stock levels not expected to return to normal until the first quarter of next year, it forecast a tough Christmas and New Year.
At 0835 GMT, JJB shares were down 5.4 percent at 26.5 pence.
