Tesco first quarter results and AGM: Three things to expect from Friday’s figures
Tesco will update the market on its first-quarter figures – the first since reporting its biggest ever loss – while executives will face shareholders at its AGM.
Here's what to expect from the supermarket on Friday.
1. The numbers will continue tumbling
The supermarket’s first quarter is unlikely to tell a different story from the narrative played out over the last year of declining sales and market share amid price wars and grocery deflation.
Analysts estimate a sales decline of between two and three per cent for the quarter to 30 May on last year, compared to a 1.2 per cent fall in the fourth quarter.
However, the supermarket experienced its first sales volume growth for the first time in four years, despite the overall downward trend, and retail analyst Steve Dresser says this is the key figure to look out for.
Tesco sales to fall etc. Of course! they've reduced prices, discounters throwing down space etc. Key metric? Volume.
— Steve Dresser (@dresserman) June 21, 2015
If volume is up then the plan at its initial point is working, discounters have stolen lots of volume which feeds their model..
— Steve Dresser (@dresserman) June 21, 2015
It would also be an improvement on last year, when like-for-like sales fell 3.7 per cent in the first quarter under former boss Philip Clarke.
Barclays analysts however point to a that as a reasonable performance in comparison to rivals – Asda down 3.9 per cent, Morrisons down 2.9 per cent, and Sainsbury’s down 2.1 per cent in their latest quarters.
According to industry data from Nielsen, Tesco sales declined 1.7 per cent and Morrison’s was the only one of the so-called big four in growth.
2. The asset sale continues
Tesco has been tight-lipped on the sale of two key assets – its Korean Homeplus stores and data business Dunnhumby.
Barclays analyst James Anstead said any significant update on these disposals is unlikely, however coinciding with the retailer’s AGM, shareholders may demand more details.
Tesco needs to find at least £5bn in order to relieve pressure on its overstretched balance sheet according to credit ratings agency Moody’s.
It’s Korean business is estimated to be worth around £4bn and Tesco is said to be in talks with potential suitors and being advised by HSBC. At least six bidders are said to be interested in the asset, including private equity firms KKR, CVC Partners and Carlyle Group.
Dunnhumby, Tesco’s jewel in the crown, has sparked furious interest from potential buyers ranging from Google to WPP and a host of private equity firms. The founders of the business behind the Clubcard loyalty scheme, Edwina Dunn and Clive Humby, may even be considering involvement in a deal, according to reports.
Interested buyers are said to be lining up bids, however, negotiations may be protracted over the price of the business since Tesco ended a US partnership and what stake Tesco might want to retain in the company.
3. Shareholder grilling
There are just four survivors from last year’s AGM of 11 directors and two of those will step down after the meeting.
After a board clear out following the supermarket’s disastrous year, new chief executive Dave Lewis and chairman John Allan now stand in the firing line of shareholder questioning.
Those questions include the pay-offs handed to senior executives who were swept out in the clean-up, including former boss Philip Clarke who walked away with £2m.
Two shareholder bodies have concerns – one issuing guidance on the pay-offs, the other on Allan retaining his position on the board of housebuilder Barratt.