Carrefour SA and Marks & Spencer Plc are among European retailers that may update investors next week about the prospects for their businesses, shedding light on the outlook for consumer spending.
Clues about the state of the economy might help determine whether the Dow Jones Stoxx 50 Index will hold on to Thursday and Friday's 7 percent rebound from a 3 1/2-year low set Wednesday.
Sales from retailers are important because consumer spending represents two-thirds of the region's economy. Some investors aren't optimistic.
"I don't think it makes much sense to pin much hope on a rip-roaring European consumer recovery," said Michael MacPhee, who helps oversee Euro 22 billion (US$33 billion) at Baillie Gifford & Co. "It hasn't happened so far, and unemployment's reasonably high. What's the reason to be optimistic?"
Consumers became more pessimistic in June, according to a survey by the European Commission released Tuesday, and European manufacturing expanded at a slower-than-expected pace.
Italian consumer confidence unexpectedly fell to a two-year low in June on concern mounting losses and job cuts at Fiat SpA will hamper a recovery. In the UK, retail sales grew at the slowest pace in 18 months in June. Industrial production figures for the UK, France and Germany are due out next week.
Concerns about the strength of an economic recovery have been compounded by a series of accounting scandals in the US, corporate debt downgrades at European companies such as Vivendi Universal SA and Ericsson AB, and muted sales growth.
Perlos Oyj, the world's biggest maker of plastic mobile-phone components, slid 5 percent Friday after forecasting a second-quarter pretax loss as sales stagnate.
"Earnings could fall this year in Europe," said James Sandison, who helps oversee US$880 million as head of European fund management at Edinburgh Fund Managers. "Confidence is very low."
Carrefour, which has risen 13 percent since setting a low this year in May, reports second-quarter sales on Wednesday after the close of Paris trading. Europe's No.1 retailer has said it's on track for profit to rise at least 10 percent this year.
Carrefour shares exchange hands for about 28 times forecast profit compared with about 16 for the average stock in the Stoxx 600 retail index.
"I don't understand why it's so highly rated," said MacPhee, who prefers Delhaize Group, Belgium's biggest retailer, and isn't planning to boost retail holdings. "I don't see where the growth is going to come from now."
Marks & Spencer, which said in May it returned to profit, holds its annual general meeting Wednesday, when it reports first-quarter sales. The UK's biggest clothing retailer was last year's best performer on the UK's benchmark FTSE 100 Index. This year it's gained 5.4 percent.
"We think the outlook for the UK consumer is still okay, but for retailers it's becoming more difficult," said Charles Deptford, who helps manage PD1 billion at Rothschild Asset Management. "Expectations are still probably too high for a number of stocks in the sector."
Safeway Plc, which has dropped 20 percent this year, said in May same-store sales growth slowed to 2 percent in the previous six weeks after renovations helped lift second-half profit. The UK's fourth-largest supermarket chain reports sales on Tuesday.
KarstadtQuelle AG, Germany's biggest department-store operator, holds its annual shareholders meeting Thursday. The company, which has slumped 44 percent this year, said in May it may cut its 2003 profit target after the weak domestic market hurt business.
Pernod Ricard SA, the third-largest liquor company, and alcoholic cider maker HP Bulmer Holdings Plc also report sales next week.
L'Oreal SA, the world's largest cosmetics maker, publishes first-half sales on Thursday. Its shares have slipped 1.3 percent this year.
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