Tesco Full-Year Results – What The Analysts Said

By Steve Wynne-Jones
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Tesco Full-Year Results – What The Analysts Said

UK retailer Tesco has reported a 3.0% increase in group sales in its 2021/22 financial year, with retail adjusted operating profit rising by 35.8%.

"Over the last year, we delivered a strong performance across the group, growing share in every part of our business," commented chief executive Ken Murphy.

Here's how leading retail analysts viewed its performance.

Russ Mould, AJ Bell

“There is a lot to like about Tesco’s results even though the company is guiding for profit to dip in its new financial year.

"The coming months will be challenging for Tesco as it faces higher cost inflation and a potential shift in how consumers spend their money. That explains why its share price has fallen nearly 5% on the results, and why Ocado and Sainsbury’s shares are also weak.


“There is a real risk that cash-strapped families will cut back on their shopping. Even though we all need to eat and drink, there is a high chance that shopping baskets may not contain as many treats as households have been consuming of late. If everyone cuts back on a few items each week, this loss of income for Tesco will certainly add up.

“If this trend does play out as expected, it won’t just be Tesco feeling the pain. On a two-year basis, Asda, Morrisons, Sainsbury’s and Co-op have all lost market share and these businesses will certainly not want to see further bad news in the form of customers tightening their belts.In fact, if supermarkets suffers from people deciding to buy fewer chocolate biscuits or a nice bottle of wine, you can almost be certain that other consumer-facing companies such as fashion sellers and electronics retailers will also be experiencing a shift in how their customers are spending.”

Richard Lim, Retail Economics

"These are mightily impressive results from the retailer. The laser-like focus on delivering low prices that match the discounters has repositioned the value proposition in the eyes of many consumers. Its innovative Clubcard-only discounts are driving improved loyalty with existing customers and winning over new shoppers in a fiercely competitive market.

"As the cost of living crisis gains momentum, many consumers will be reevaluating their priorities and we're likely to see recessionary behaviours kick in fast. For many shoppers, this will mean trading down to own-label brands, switching retailers and scaling back on premium purchases as a more cost-conscious consumer emerges.


"Tesco is well-positioned to protect its market share given the competitive advantage offered by its loyalty scheme, the digital capabilities within the business and its scale, which offers meaningful negotiating power with suppliers."

Barclays European Food Retail Equity Research

"Tesco has delivered a strong set of results for FY22, with cash generation particularly robust (£2.28 billion). The strong FCF outcome – and indeed Tesco's confidence that it can deliver its FCF target again in FY23 – is being reflected in the share buyback run-rate being accelerated by 50% (from £500 million pa to £750 million pa). However, we always expected the market to be most focused today on Tesco's profit outlook given the current extremely limited visibility – not just due to high food inflation but also due to sharply rising labour and energy costs (partly offset by lower COVID costs).

"While one could argue that Retail EBIT guidance of £2.4 billion to £2.6 billion represents a reasonably tight range in the circumstances, the unavoidable conclusion is that we trim our Retail EBIT forecast by c6% for FY23, and we expect that the market will be most focused on that dynamic initially. We continue to think that Tesco is doing the right things for its customers and that this will continue to fuel its market share momentum."

Clive Black, Shore Capital

"Tesco, the UK's largest grocer by market share, has issued good FY22 results, which represent a small beat to our forecasts. However, perhaps the more important element of the update is Tesco's commentary around rapidly evolving food markets, and so the context within which it sees both its own business and the wider ecosystem operating.


"Following this update, we are shaving our FY23 EPS estimates by 4% to 5%, and cutting our stance on Tesco's equity from Buy to Hold; retaining a more positive stance feels like pushing water up a hill.

"Tesco has reported a very good FY22, gaining share in its core UK market, performing well in Ireland, Booker excelling and executing exceptionally well, including its reading of the more supply constrained British food system in CY 21, and so delivering what to us is a strong set of financial results."

William Woods, Bernstein

"Tesco reported FY21 results today with strong FCF and more buybacks. FCF beat by +26% at £2.3 billion FCF and a further £750 million buybacks were announced, which should be seen as a positive. Group LFLs of 2.3% beat company collected consensus of 1.7% by +63bps, with contribution from both segments. EBIT came in line at £2.83 billion. However, FCF at £2.28 billion beat consensus of £1.81 billion by +26%, [which] is very positive.

"In addition, they announced further buybacks of £750 million by April 2023. We like their focus on strengthening customer proposition through value in the current inflationary environment."


Walid Koudmani, XTB

"Tesco provided investors with some positive reassurance showing strong sales throughout the year. Retail one-year LFL sales growth includes UK market outperformance and sharp recovery along with market share gains. This continues to show how the company is benefiting from the post-pandemic recovery thanks to a normalisation of consumer behaviour and as it continues to move forward with it's share buyback program.

"However, Tesco remains cautious as it expects to contend with increasing costs and widespread inflation which could once again impact performance if not mitigated appropriately."

Mark Dodds, Chartered Institute of Marketing’s Food, Drink and Agriculture Group.

"This morning’s results show Tesco’s prowess as a retail powerhouse and more importantly, as a supermarket which really knows its customers – an aspect which is essential as rising costs impact consumers.

"Its recent Ramadan and Eid campaign, providing specially selected items to millions of Tesco customers who celebrate, is a fantastic example of a company understanding customer needs. The campaign was expertly executed – starting with speaking to the community and researching what they liked and didn’t like – to ensure a fully integrated campaign that was helpful to its customers.

"While initiatives like these have put Tesco close to its shoppers’ needs, with living and food costs reaching new heights, the supermarket will need to do all it can to keep cost-conscious customers on board over the coming months."

© 2022 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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