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Tesco expected to slip behind market rivals

A trading update from retail giant Tesco will shine the spotlight on the supermarket sector this week ahead of the all-important Christmas season, with results from Thomson parent TUI Travel also set to be a highlight.

Tesco is expected to report sales slipping back into the red in its third quarter as rivals turn up the heat on the UK's biggest supermarket chain.

The grocery giant gave hope of better trading last month when it said like-for-like sales had edged 0.1% higher in its second quarter, following six quarters in a row of falling sales.

But analysts are forecasting Wednesday's update to show a return to sales declines as general merchandise continues to take a hit.

Nick Coulter, Nomura retail analyst, is pencilling in a 0.9% fall in like- for-like sales, excluding VAT and fuel, in Tesco's third quarter.

Thomson owner TUI Travel is expected to post a jump in profits on Tuesday as holiday-makers fall back in love with the package trip.

City experts predict the group's underlying operating profit will rise 2% to £480 million in the year to September 30.

In an update in September, TUI reported a surge in bookings for next year as families look to avoid another miserable British summer. It said UK bookings for next summer were already up 10% against the same period last year.

Sales in its key UK market were up 5% this summer after a 10% rise in average selling prices offset a 6% reduction in capacity.

Investors will find out on Thursday how badly handbag group Mulberry was wounded in the first half of its year after demand or luxury goods in Asia slowed.

The group warned over profits in October, blaming lower-than-expected international sales and a 4% decline in wholesale shipments.

This took the shine off a 13% hike in retail sales to £46.5m, including a 10% rise in UK sales.

Last year, the group recorded half-year pre-tax profits of £15.6m, more than treble the £4.7m in the previous year, as it rode the boom in Asia's luxury goods market.

Its shares peaked at 2500p in the summer, but are less than half that level on signs of a slowdown in Asia.

Philip Dorgan, analyst at Panmure Gordon, said Mulberry's recent profit warning was "severe".

He said: "Given that it has had a tremendous run in terms of both share price and profits, it is now at the crossroads. Either, we are wrong about the scale of its international opportunity, or this is just a blip."

Transport operator Stagecoach is set to show investors it is on the right track when it posts an expected 33% leap in profits on Wednesday.

Experts predict underlying half year pre-tax profits will rise to £118m, up from £88.7m a year earlier.

In a trading update in August, the group reported "good" trading in its first quarter to July 22 and said it remained on track to hit full-year targets. Geof Collyer, analyst at Deutsche Bank, said he expected half-year results to "reinforce Stagecoach as the quality name in the sector".

Stagecoach said underlying revenues at its rail and regional bus businesses in the UK rose 6.8% and 4.1% respectively in its first quarter. Its London bus operations saw a 5.7% decline as it let less profitable contracts go.

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