Tesco is holding its share against discounters after the release of its first-quarter results, said Barclays.
“While sales growth (up 9% like-for-like) has been flattered by ongoing high food inflation, Tesco is holdings its share in the core UK business,” the broker said.
The FTSE 100 grocer also noted that there are signs inflation is starting to ease, although there remains a debate as to whether this is a good or bad thing for Tesco.
“Given that high food inflation has not obviously helped industry profitability it is far from clear to us that we should be worried about the effect of more normal levels of inflation,” Barclays said.
“While outright deflation could pose challenges, we are sceptical that the industry will shift very far into deflationary territory given the ongoing inflationary pressure on staff costs.”
Tesco’s 320p target price with Barclays remained unchanged, with the high-street lender remaining overweight on the stock.