11 January 2024
If you are covering the latest financial results from Tesco and M&S, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Tesco and M&S have followed up Sainsbury’s relatively positive Christmas update with a bit of festive cheer of their own. They have both delivered good results and are taking market share. With Sainsbury’s claiming the same, the private equity backed supermarkets, Asda and Morrisons, must still be suffering and not enjoying quite the same positivity.
“Interestingly in the results we are seeing a good picture of the British consumer. M&S is seeing its value range of food items do very well, up 18%, while Tesco saw its Finest range climb 17%. Both ranges probably compete with one another on price and thus you are seeing a consumer who is willing to spend a little bit extra still, especially on special occasions.
“We are also seeing a return to growth for online shopping following the post-Covid normalisation. Both Tesco and M&S saw double digit growth here in food and clothing, so it will be interesting to see if this is matched by others, such as Ocado, or if it is a stock specific story.
“For investors, both companies are not particularly expensive and have had good 2023s. Tesco has delivered an explicit upgrade to guidance, while M&S has implied a small one, but has subsequently been treated more harshly by the market. These results effectively complete its turnaround story, and given how much the share price has gone up in the last year, perhaps investors are using these results as a time to take some profits.”
