The announcement that Tesco's UK sales beat estimates is being viewed as another positive step for chief executive officer Dave Lewis, who is hoping to mastermind a turnaround of the retailer's fortunes after a disastrous 12 months. Here are several top financial analysts' views about Tesco's latest results.
Ken Odeluga, a senior market analyst at CityIndex.co.uk, said, "Tesco has released almost the best Q1 results investors could have hoped for. On one level, there’s certainly room for surprise and a few red faces among City analysts, many of whom had expected Tesco’s key UK like-for-like sales to tank by an additional 2 per cent to 3 per cent. On the other hand, with signs of inroads by Tesco’s turnaround CEO, Dave Lewis, already evident from final results – a forecast-beating £1.4bn trading profit, and sales breaking into the black in the spring – sales risks were arguably on the upside."
Darren Shirley, an analyst at Shore Capital, agreed with CEO Dave Lewis's view that the latest results were a step in the right direction for the company. He added, "We are not changing our overall financial expectations for Tesco, forecasting trading profit of £1.175bn (consensus £1.37bn, Source: Vuma) incorporating a UK trading margin of 0.5 per cent. We look for CPTP of £615m, EPS of 5.8p, and we do not anticipate the recommencement of a dividend payment in FY2016 or FY2017, as deleveraging the business both operationally and financially remains a management priority."
Analysts for Bernstein said that Dave Lewis warned that the recovery would be bumpy, "but we are already seeing good progress with UK like-for-likes continuing to see sequential improvements. We believe that what remains of negative like-for-likes are the result of UK-wide deflation and Tesco's beyond-deflation price investment in fast-selling branded goods. Therefore, the path should be set for positive like-for-likes in the quarters to come."
Lastly, David Gray, retail analyst at Planet Retail, commented, “This morning’s domestic like-for-like numbers showed modest improvement on Q4, suggesting Dave Lewis's recovery programme is seemingly beginning to bear fruit. There were a few positive signs from the results: the like-for-like numbers are better than some rivals, notably Asda, while signs of a return to volume growth – one of Lewis’s key objectives – are discernible. Considering the headwinds of flat or falling food prices, the UK figures are a step in the right direction – or, at the very least, still better than this time last year."
© 2015 European Supermarket Magazine – your source for the latest retail news.
