By City AM reporter
Tesco is predicted to reveal “another strong quarter” next week as the supermarket giant seeks to maintain sales growth despite pressure from discounter rivals.
The UK’s largest grocery firm will update investors with a first quarter trading statement on Friday June 14.
Industry experts have predicted it will reveal another increase in sales for the period, with improving volumes of products bought by shoppers helping to offset the impact of easing inflation.
Analysts atJefferies predicted it will report 4.3 per cent growth across its UK and Ireland retail business for the three months to May.
It would reflect a slight slowdown in growth, but this is largely expected because of the continued fall in the rate of inflation.
UK food and drink inflation peaked at 19 per cent in March 2023, according to the Office for National Statistics, but dropped to 2.9 per cent in April this year as pressures from high energy prices and supply disruptions eased.
James Grzinic of Jefferies said the retailer is on track for “another strong quarter” after Kantar “pre-emptively published impressive relative sales performance by Tesco in the UK, despite UK food CPI (consumer price inflation) slowing”.
Kantar’s latest sector data indicated that Tesco has increased its share of the UK grocery market to 27.6 per cent in May from 27.1 per cent a year earlier.
The UK’s two largest grocers – Tesco and Sainsbury’s – have solidified their position in the market by investing in pricing in order to ensure customers do not switch to discounter rivals.
As a result, they have seen growth beyond that of Asda and Aldi over the past year.
Tesco revealed in April that its adjusted operating profit grew by almost 13 per cent to £2.93 billion for the year to February on the back of the continued growth.
Last month, it said it would hand chief executive Ken Murphy a £9.93 million pay package for the past year, more than double what he received a year ago, after bonuses were boosted by the strong recent performance.
Analysts at Barclays added: “Recent market share data suggests that even if Tesco’s sales growth is slowing, its performance relative to the wider UK market continues to look very robust.
“If our forecasts are broadly correct then we would see this as a positive start to the year.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The group’s market-leading offering and market position means investors are cautiously optimistic.
“Clothing and home sales may prove trickier, despite Tesco’s efforts to streamline.
“The tougher environment is closely linked to the economic climate, and analysts would like some more details on demand expectations in the medium term.”
By Henry Saker-Clark, PA Deputy Business Editor
