Tesco PLC (LSE:TSCO)’s trading statement was deemed as “sound” by broker Shore Capital, which has left its profit forecasts for the fiscal year 2023 unchanged.
But the current UK macroeconomic outlook remains worryingly uncertain, leaving the broker to retain its neutral stance on the stock despite good trading across the board.
The update was good given it was against multiple years of robust comparatives for Tesco, reflecting a generally clear plan and good execution across the board, analysts noted.
Like-for-like sales (ex-fuel) were up 6.4%, ahead of the 5.3% consensus with Shore Capital highlighting Clubcard as an important dynamic, with customers redeeming 4mln coupons, and growth in Tesco UK’s online activity with participation sitting at 13%, meaning notable share gain.
Booker was the star of the show within the Tesco family, the broker said, noting tough comparatives with notable share gains in catering (+19.2%).
“All in all, across the board effective execution in our view,” Shore said.
But it does have concerns, particularly regarding the current macroeconomic environment.
“Until inflation eases, so that household finances have the prospect of improvement and so consumer confidence increases, we are also nervous about aggregate demand and so the robustness of our financial estimates for FY24 in particular.”
This remained the reason why the broker has held back from taking a more positive view on Tesco for now. It repeated a ‘hold’ recommendation, suggesting shares may head “sideways for the short-term”.