Tesco set to report slower sales growth
TESCO, Britain’s biggest retailer, is set to report slower underlying UK sales growth than rival J Sainsbury for the fifth quarter in a row this week, alongside a small rise in first-half profit.
But analysts expect Tesco to flag a stronger second-half profit performance, and some see signs it is beginning to close the gap on faster-growing competitors like Asda and Wm Morrison, as well as Sainsbury’s.
Tesco, which runs around 4,300 stores in 14 countries, is more exposed to discretionary non-food items, which have suffered more than groceries in the recession.
Some of the underperformance has been self-inflicted as well. Tesco launched a cheaper range of discount brands in September last year, which helped to stem the flow of customers to hard-discounters like Aldi and Lidl in the recession, but also depressed the amount of money it takes at the till.
As the launch of the discount brands passes its anniversary, analysts expect Tesco’s relative performance to improve.
Analysts expect Tesco to report a 3.4 per cent rise in sales at British stores open at least a year, excluding fuel and VAT sales tax, for its second quarter ending 29 August, according to a Reuters poll.
That would be down from 4.3 per cent in the first quarter, due in part to a tougher comparative number last year and to falling food price inflation.
Sainsbury’s, Britain’s third-biggest grocer, is expected to report a 5.6 per cent rise in sales on the same basis for the 16 weeks to 3 October, down from 7.8 per cent in the first quarter for the same reasons.
Tesco’s total global sales for the six months to 29 August are tipped to climb 10 per cent to £28.1bn with an acquisition in South Korea last year offsetting weakness Europe.