14 June 2024
If you are covering Tesco’s latest financial update, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Tesco’s latest trading update shows the trend of good performance from the supermarkets continuing into 2024, as it saw positive growth in its food business. Importantly, for the UK’s biggest supermarket it gained a small amount of market share in the quarter and continues to benefit from price inflation. While this is easing, Tesco has the scale and capabilities to make this last as long as possible.
“Tesco’s results also epitomise the recent cost of living crisis – its Finest range of food is up 12% as higher income customers continue to spend more on better quality products, meanwhile those on lower incomes continue to cut back where possible. To this end, the food business of Tesco continues to be the main driver of earnings as consumer discretionary spending continues to see a slowdown. As such, while inflation has eased for customers, this is not resulting in supermarkets’ non-food divisions returning to strength.
“Tesco has reiterated its guidance for flat profits, but we see this as somewhat conservative. Management is doing well, while private equity owned supermarkets – Asda and Morrisons – struggle as priorities are very different. Tesco has a good opportunity to take advantage of these trends especially as inflation continues to ease and disposable incomes recover.”
