Tesco is expected to report improving growth in its half-year update on October 8 after a weaker-than-expected first quarter, according to analysts.
The supermarket group reported sales growth of 1% for the three months to the end of May. Tesco said shopper sentiment had been affected by the situation in the Middle East, although it had not seen price inflation linked to the conflict. Sales were also affected by a difficult comparable period a year earlier and unfavourable weather.
Analysts said warmer summer weather and the easing of those challenges could support stronger growth during the rest of the first half. Hargreaves Lansdown equity analyst Aarin Chiekrie said markets were forecasting first-half revenue to rise 3.1% to £37.2 billion.
Chiekrie also said Tesco’s recent market-share gains were expected to continue, pointing to initiatives including Aldi Price Match and the expanded Finest range. Latest Worldpanel data, released last month, indicated that Tesco held a 28.1% share of the grocery market, ahead of Sainsbury’s and Asda combined.
Investors are also expected to focus on Tesco’s outlook for food-price inflation. Higher energy prices are predicted to drive an acceleration in inflation, leaving the retailer to decide whether to invest further to keep prices low or pass more costs on to customers to support profit growth.
Tesco most recently guided towards adjusted operating profit of between £3 billion and £3.3 billion for the full year.
The company could also address speculation that it may sell its operations in continental Europe and focus more heavily on the UK and Ireland. Danni Hewson, AJ Bell’s head of financial analysis, said such a move would be consistent with Tesco’s narrower strategic focus in recent years.
