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Tesco Q3 Results: What The Analysts Said

By Steve Wynne-Jones
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Tesco Q3 Results: What The Analysts Said

On Thursday, Tesco posted third quarter figures that indicated a 1.8% increase in like-for-like sales in its home UK market in the third quarter, with group sales up 1.5%. Dave Lewis, Tesco chief executive described the retailer's performance as "sustained strong progress." Here's how leading retail analysts saw it:

David Alexander, Verdict Retail

"Simplifying the offer has been at the heart of Tesco’s turnaround strategy. Tesco is not unique among the big grocers in recognising the need to simplify its offer, but while the Dave Lewis era at Tesco has been characterised by disposals, over at Sainsbury’s it is the acquisition of Argos that is the headline of the Mike Coupe reign so far. While Tesco bets big that a leaner business more focussed on grocery is the way to cement its position in the UK, Sainsbury’s appear to have adopted the opposite approach, banking on the twin strengths of grocery and a greatly enhanced, non-food, multichannel offer to give it the edge. For the time being, Tesco continues to outperform its rival in grocery, but the early signs from the Argos integration are promising and as a more complete grocery and non-food business, in this respect, Sainsbury’s now represents much more of a threat to Tesco’s supremacy going forward."

Clive Black, Shore Capital

"Tesco has reported Q3 & Christmas trade following what were two better than anticipated updates from Big Four peers; J. Sainsbury and Wm. Morrison Supermarkets. In the big scheme of things we see this as a pretty good update, slightly beating our expectations, which is welcome. […] Tesco states that UK Christmas LFL sales (six weeks) were ahead by 0.7%, the lower run-rate reflecting the tougher comparative and the ongoing process of simplification, such as the absence of ‘bells & whistles’ initiatives like Clubcard Boost, which yielded a 0.8% drag on figures according to the company; food LFL sales over Christmas were 1.3% ahead whilst clothing & toys were up by 4.3% and 8.5% respectively. In Ireland, it is pleasing to see positive LFL sales for Q3, at 0.5%, with festive (6W) same store sales down by 0.7%."

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Ray Gaul, Kantar Retail

"Tesco plc’s run of good results continues with a strong 0.9 % revenue growth for the six-week Christmas season ended 7 January. Company boss Dave Lewis will now turn the company’s focus to his ‘Big 6’ objectives for 2017/2018. Much of this success is down to good planning and team work – one area that is showing strong improvements over the period. Some highlights of the great success Tesco had this Christmas include the opening of the Livingston distribution centre to service Scotland, bringing in an additional 15,000 staff for the holiday season, and improved customer numbers with 54% of British households shopping at Tesco during the Christmas shopping week."

David Beadle, Moody’s

“Tesco’s ongoing revenue momentum, like that of its rated peer Morrison’s, is credit positive, with their trading statement published today detailing accelerating positive like-for-like sales growth in the UK during the third quarter of the fiscal year, and another year with positive UK like-for-likes over Christmas. Importantly, the strong top-line performance is being achieved alongside ongoing cost savings. As such, the company is guiding for full year profits to be at least in line with previous market expectations, which represents an improvement on the prior year. However, despite the signs of operational progress, profitability remains well below historic levels and the level targeted by management by the fiscal year 2019/20."

© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.

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