Retail giant Tesco has posted its eighth consecutive quarter of growth, with like-for-like sales up 2.3% in its home market.
If Christmas trading is also included, Tesco posted a LFL increase pf 2.2%, which chief executive Dave Lewis says was as a result of the retailer's "most competitive offer for many years."
Here's how the analysts saw it:
Bruno Monteyne, Bernstein Research
"This is the 4th strong Christmas trading in a row for Dave Lewis. The first signs we had of change in volumes was Christmas trading 2014 which took everybody by surprise. [...] Strong Food LfL of +3.4% while general merchandise continues to be a drag. Tesco's UK LfL is still experiencing a drag of ~0.6% general merchandise sales as they scale down the less profitable parts of the general merchandise business. This should be positive for margin. The profitable part of the business, food, was very strong for the 19 week period, growing LfL sales +3.4% and growing fresh food sales at +3.7%, outgrowing their peers."
Connor Campbell, SpreadEx
"On the surface Tesco’s figures were pretty stellar; a ‘record’ performance in the run up to Christmas, and a 3.4% jump in food sales suggested the biggest of the Big Four had a fecund festive period.
"Yet investors couldn’t help by feel disappointed, with total like-for-like sales quite sharply missing estimates at just 1.9% – basically in the middle of Sainsbury’s lacklustre 1.1% growth and Morrisons’ robust 2.8% rise – after the collapse of wholesaler Palmer & Harvey weighed on the supermarket’s tobacco sales. Tesco, which had risen around 20% in the last 2 months, a period that contained a ‘Buy’ rating from Goldman Sachs and the green light for its Booker acquisition, fell 4% after its results were released, leaving it at a one month low of £2.04."
Catherine Shuttleworth, Savvy
“Great performance over Christmas from Tesco - especially in food and outperforming the rest of the Big 4. The turnaround strategy is starting to yield rewards even in this most unforgiving of markets.”
Clive Black, Shore Capital
"Tesco issued what we deem to be a good 19-week (19W) trading update, a third year of consecutive peak period growth. However, whilst Q3 trade met our expectations, 6W festive trade in the core UK was a little lighter than our elevated aspirations, a c0.5% miss. The demise of wholesaler Palmer & Harvey was also an unwelcome short-term hiatus but that is all it is. We do not change our recently upgraded FY2018 PTP expectations and we warmly welcome management’s guidance on still meeting FY2020 margin targets (ex-Booker).
"Tesco stock is up with short-term events, for sure, but the rating compression to FY2020 is considerable, solvency ratios are set to materially improve, so supporting the stock rating potential in our view, and there could be meaningful technical support factors as new long-only owners come-in and hedge funds close out shorts."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
