UK: Tesco expected to announce signs of recovery
The supermarket company may say six-week revenue at stores open at least a year rose 1 percent, excluding gasoline and value-added tax, according to the median estimate of 10 analysts surveyed by Bloomberg News. That would be the strongest growth since 2010 and only the second positive performance in eight quarters. Sainsbury’s sales on the same basis probably rose 0.9 percent in the third quarter of the fiscal year, the estimates show, less than the prior quarter’s 1.9 percent gain.
Tesco’s figures, while flattered by comparison with what the grocer described as “disappointing” sales a year ago, are likely to show that Chief Executive Officer Philip Clarke’s efforts to regain customers are paying off. The CEO is investing 1 billion pounds ($1.6 billion) to provide additional staff, new products and brighter stores.
“Tesco has improved service and is likely to have been the relative winner over Christmas,” said Dave McCarthy, an analyst at Investec Securities with a sell rating on the shares. Still, the estimated growth in sales represents “a significant volume decline” given the pace of inflation, he said.
Tesco is scheduled to report Christmas sales on Jan. 10, a day after Sainsbury. An improved performance from the retailer over the holiday period probably weighed on its rival, according to James Griznic, an analyst at Jefferies International.
Sainsbury’s sales are expected to beat those of smaller competitor William Morrison Morrisons may say same-store sales declined 2.5 percent in the six weeks ended Dec. 30, according to analyst estimates, putting profit estimates at risk.
Morrison will “kick off the January trading season in a weak manner” when it reports sales on Jan. 7, said Griznic of Jefferies, Morrison’s brokerage adviser.
For Tesco, a 1 percent gain in same-store sales would represent “real growth in a very tough market,” Richard Perks, a retail analyst at Mintel International, said by phone. “It’s really fought back effectively in food, and is going head-to- head against an improved offer in Sainsbury.”
Tesco’s possible revival is likely to coincide with a worsening decline at Morrison, which according to Jefferies’ Griznic is being hurt by competition from discounters such as Aldi and Lidl, particularly in its north of England heartland. The grocer has also been affected by an acceleration of the shift toward online shopping, which it doesn’t offer, he said.
Source: bloomberg.com
