Tesco Third-Quarter Results – What The Analysts Said

By Steve Wynne-Jones
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Tesco Third-Quarter Results – What The Analysts Said

Tesco has reported a bumper Christmas, seeing group sales up 6.7% over the 19 week period including its third quarter and six weeks of festive trading.

"Our powerful combination of great value, quality, availability and service means that we head into the New Year in great shape to keep delivering for customers," commented Tesco chief executive Ken Murphy.

Here's how analysts and industry commentators from Third Bridge, GlobalData, Bernstein, Shore Capital, AJ Bell and PromoVeritas viewed its performance.

Orwa Mohamad, Third Bridge

“Our experts expect Tesco’s volume recovery to continue in 2024, driven by a decline in food inflation and improving consumer confidence.”

“In 2023 Tesco worked hard to maintain price competitiveness, enhance efficiency, improve service levels, and bolster its loyalty scheme. Although food inflation is now falling away, our experts don't expect significant price cuts any time soon. There might be selective price reductions here and there for attention-grabbing marketing purposes but not much more. There's a greater likelihood of Tesco seizing margin opportunities as its cost pressures ease.”


"Our experts have noticed that Tesco has been reinvesting in their Extra stores after years of cost-cutting measures. This stands in stark contrast to Morrison's adherence to traditional strategies like fuel discounts and promoting fresh counters.”

Eleanor Simpson-Gould, GlobalData

“Tesco’s results reflect an empowered strategy focus, upscaling the long-established Clubcard scheme and improving product innovation to fend off discounters, which has been a cornerstone in Tesco’s year of consistent sales growth.

"The challenges ahead for Tesco in Q4 are faceted, with disposable income expected to improve in 2024 and a resurgence in customers trading up to premium ranges. Tesco must utilise the success of its broadened Finest range, up 16.7% l-f-l in the period, and third-party propositions to entice customers to dine in this Valentine’s Day and secure a final sales boost in FY2023/24.

“As the final quarter gets underway for Tesco, the grocer is strengthening its proposition to cement its position as the market leader in the final weeks of Q4, announcing a double Clubcard points scheme, the first of its kind offered in over a decade, which will run for seven weeks to 25 February and enhanced plant-based propositions to capture Veganuary shoppers.”


William Woods, Bernstein

"Tesco continues to gain share and now [stands] at 27.9% in the UK, with 10 consecutive periods of share gain. Finest also delivered strong sales growth at +16.7%, consistent with Sainsbury’s reporting yesterday, and registered net switching gains for the 17th consecutive period from premium retailers.

"ROI also performed strongly at +8.3% LFLs (+350bps beat) while Booker slightly weaker at +3.9% (-150bps miss) due to Best Food Logistics stepping away from unprofitable sales."

Clive Black, Shore Capital

"We like the cash-compounding nature of the Tesco investment thesis, noting that the firm is expediting a strategy where controlled growth is part of the plan. Hence, the visibility around future earnings and cash flow generation strengthens and so do ongoing dividends, buybacks, and self-funded organic progress.

"Combined and sustained, this tends to lead to rating expansion, more notably so in more normalised wider markets where interest rates are not zero. Accordingly, we continue to see a lot to like in the Tesco investment thesis."


Russ Mould, AJ Bell

“Tesco’s latest update was always going to be compared with that of Sainsbury’s and on this basis it scores well as, unlike its rival, it has delivered a profit upgrade after a record Christmas.

“While Sainsbury’s is preaching ‘food first’ under its new management, Tesco is living it. Sainsbury’s has, thanks to Argos, a chunky general merchandise arm. Tesco has already narrowed its focus and, while it does sell items like clothing, homeware and toys in-store, there is no doubt that its core focus is groceries.

“The company has worked hard to compete with the German discounters and its Clubcard price offers have helped build loyalty among weekly shoppers – to such an extent that others have followed in its wake with giving better prices to loyalty card holders. The only worry there is the regulator has its eyes on this practice and whether it might be anti-competitive.

“The strong performance of its Finest range hints at Tesco benefiting from traditional Waitrose customers trading down but still wanting quality produce – matching the trend seen at Sainsbury’s with its Taste the Difference brand.”


Jeremy Stern, PromoVeritas

“As the major retailers continue to release their Christmas results, a fierce price matching battle is now looming as they look to boost growth with increasingly competitive promotions and discount schemes.”

“Discounts tend to be bigger in bricks and mortar stores than they are on websites. In tough economic times, if you want a bargain you go to a store. Many e-commerce sites use dropshipping. This means they show the item on their site, but do not actually carry stock – they simply pass the order onto the brand to fulfil directly. Thus, if a product is not selling, it is not costing the website anything. However, a high street retailer does carry stock of all that they sell, and if it is not moving it costs them, so there is a greater need to shift it by discounting heavily.”

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