Tesco's First-Half Results – What The Analysts Said

By Steve Wynne-Jones
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Tesco's First-Half Results – What The Analysts Said

Tesco has announced its half-year results, with the business seeing a 6.5% like-for-like sales increase at a group level, and a 7.6% sales boost at its core UK operations.

It's the first set of results overseen by new chief executive Ken Murphy, who said that the business is "absolutely committed to continuing to invest in value for customers and safety for all in these uncertain times".

Here's how leading retail analysts viewed its performance:

Thomas Brereton, GlobalData

"Tesco’s eagerly anticipated H1 results reveal an impressive performance amid an incredibly tough backdrop, navigating the choppy waters of COVID-19 to deliver strong growth in its core UK & ROI market. Although total sales suffered as non-food sectors fell victim to altered consumer behaviour habits (notably UK clothing sales down 17.2% and fuel down 42.0%), a market-leading performance from food (+9.2%) shows Tesco’s ongoing strategy of retreating from international markets to focus on UK & ROI food is harmonious with downtrodden customers prioritising food spend over non-essential purchases.

"The results also welcome Ken Murphy as new CEO, a tried and tested leader with lengthy experience in UK retail from his time at Walgreen Boots Alliance. While he takes up the mantle against a much more tranquil internal backdrop than Dave Lewis did in 2014, he will need to cope with numerous external challenges (including COVID-19, recession and Brexit) that will require quick adoption of new policies to meet rapidly shifting consumer choices.


"The existing strategy of a dual assault on value and online fulfilment is a good one for Tesco. It has overhauled stores to shield itself from surrendering further market share to the discounters, with its Aldi Price Match and rejuvenated ClubCard loyalty scheme front and centre in the minds of value-driven consumers.

"In the face of a fragile UK economy and distressingly low consumer confidence, this tactic is and will continue to bear fruit for Tesco."

Clive Black, Shore Capital

"First impression of Tesco's H1 FY2021 results suggest a comfortable beat to Shore Capital's (SC) expectations; we forecast £527 million and it has come £717 million although in guiding to balanced half-on-half outcome we keep our full-year forecasts intact with risk, to us, on the upside.

"As such following this update, and ahead of the presentation from new CEO, Ken Murphy, we expect to retain our FY2021 PTP and EPS expectations (£1.57 billion, 16.3p post consolidation EPS respectively). Within the statement we note the Tesco's Board has decided to declare an interim dividend per share (DPS) of 3.20p, which we welcome (35% of last year’s full dividend, in line with policy).


"The hand-over was very quiet as Dave Lewis eased out of Tesco last week (30th September), handing the reigns to Irishman, Ken Murphy, who has had plenty of time to reflect on his new role, albeit only seven days to officially prepare for his first financial set piece, the H1 FY2021 interim results.

"And what a context Mr. Murphy comes into as Tesco's boss, with the prevailing coronavirus crisis showing no signs of easing, quite the reverse in the UK and Ireland, with both countries in recession and the stew still simmering of the UK's ongoing relations with the EU, which could have notable implications for the food system in the British Isles. Indeed, unlike Mr. Lewis, who faced into a morass of internal strife, it is external factors that are perhaps the key challenges for his successor to overcome."

Russ Mould, AJ Bell

“It turns out that Tesco’s initial expectation that the benefits from a change in the UK’s shopping habits would be outweighed by the extra costs associated with adapting to COVID-19 realities was a bit conservative.

“Despite the investment required for hygiene measures, distancing and an expansion of its online delivery capacity, the company still reported an impressive advance in first half profit. A big rise in the dividend is also welcome but it is worth remembering the scale of the increase reflects a shift in dividend policy rather than significantly more generous payout.


“All-in-all this represent a very solid start for new CEO Ken Murphy following the departure of his predecessor Dave Lewis last week. Lewis is effectively teeing Murphy up for an open goal and providing a confidence boost for the new man by handing over a very well set-up operation.

“While Lewis has done a good job of fixing the internal problems which dogged the business in the early-to-mid-2010s Murphy will face significant external challenges around coronavirus and Brexit which could define his tenure."

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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