Analysts Cautiously Welcome Flat Tesco Full-Year Results
Analysts have weighed in on Tesco’s full-year results, which show a flat performance for its like-for-like group sales and a decline in its core UK & ROI market, of 0.7 per cent.
For the most part, the results were considered a positive step for the retailer, which reported a record loss last year.
Shore Capital analyst Clive Black commented, “Compared to its near all-time-record asset-impaired losses of FY2015, Tesco's FY2016 preliminary results are positively boring.
"The key word here though is 'positively', as one year on from a day of reckoning, Tesco has reported material steps forward on a road to recovery and, hopefully, a better place for its long-only investors."
Stifel’s interpretation of the results is that they reflect "the significant improvements made to the business and strong volume growth in the UK and international".
David Cheetham of CFD and FX broker at XTB.com commented, "These preliminary results for 2015/16 from Tesco are, in general, better than expected and show further evidence that the decisive turnaround measures implemented by CEO Dave Lewis since taking the reigns of the company in September 2014 are starting to improve performance."
Meanwhile, Connor Campbell, senior market analyst at Spreadex.com, noted that the retailer’s like-for-like sales increase for the UK was higher than expected, at 0.9 per cent, and that the operating profit of £944 million was an improvement on the forecast £936 million.
However, he added that the supermarket’s stock still fell by 4 per cent on the back of the results, referencing Tesco CEO Dave Lewis’s warning that a "challenging and uncertain" supermarket landscape would slow Tesco’s first-half profit growth.
Bernstein also had a measured response. "This is a great update from Tesco, looking backwards: solid sales and volume growth, and marginally beating consensus.
"However, the guidance for profits next year is disappointing. Tesco is not really guiding for profit improvements, but for profit stagnation, despite the tailwinds from buying back leases."
Finally, Barclays saw the results as bringing mixed news, making only limited cuts to its EBIT forecasts, and bringing its 16/17 forecast from £1.15 billion to £1.10 billion.
"Although the 2H out-turn of 1.6 per cent was encouraging (+81 bps from 1H), the company's cautious tone generally – and on the 1H 16/17 progression specifically – is unlikely to excite the market and may well cool the most optimistic expectations," it said.
© 2016 European Supermarket Magazine – your source for the latest retail news. Article by Jenny Whelan. To subscribe to ESM: The European Supermarket Magazine, click here.