This week: Tesco set to report higher sales following pandemic boost
Tesco is expected to post rising sales this week as its supermarkets stayed open throughout the pandemic.
The UK’s biggest grocer may also reveal more muted profits in its update for investors on Wednesday, however, as they are forecast to be broadly in line with last year’s profits.
Analysts have predicted that the supermarket, which is under the new leadership of chief executive Ken Murphy, will reveal an operating profit of around £1.7bn for the year to February.
However, this will exclude the impact of its decision to hand back £585m worth of business rates relief back to the Treasury.
The supermarket chain has been one of the sector’s most consistent performers over the past year and hailed “record” Christmas in its previous trading announcement.
It saw sales increase by 6.7 per cent in the three months to November, accelerating to 8.1 per cent in the key weeks around Christmas.
Market share increase
In February, the grocer also increased its market share, for the first time in four years, according to data from Kantar as it was buoyed by continued strong growth in its online operations.
Shareholders will hope that its Christmas sales momentum continued into the latter part of the fourth quarter.
“Tesco put in a very strong performance over the Christmas period, and some analysts expected consumers to pull out all the stops for Easter this year,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown in London.
“We wonder if Tesco was able to repeat that strength in the run up to the latest round of celebrations.”
Analysts have forecast that it will reveal revenues of £58.4bn for the year, with Credit Suisse stating that its like-for-like retail sales are expected to “remain strong” as hospitality and non-essential stores remain shut.
Shareholders will be keen to hear from Murphy how the supermarket group expects to retain trade despite the easing of coronavirus restrictions and inevitable reduction of meals eaten at home.
However, the return of hospitality and food-to-go markets could also help spark improvement in its Booker wholesale business which saw sales slide 8.3 per cent over the Christmas period.
Dividend
Investors will also be keen to hear how the retailer’s robust performance over the past year will be reflected in dividends.
“Tesco has slowly rebuilt its payment up from 2016 and 2017 when it offered nothing and in the year to February 2021 the firm paid out 59.04p a share which included a special dividend payment of 50.93p a share following the sale of its business in Thailand and Malaysia,” commented Russ Mould, investment director at AJ Bell in London.
“That pay out was followed by a share consolidation which kept share prices from tumbling. Investors will be hoping to see payouts continue at similar levels next year excluding the special dividend,” Mould added.