Tesco PLC (LSE:TSCO) lifted its full-year profit guidance on Wednesday and analysts at Shore Capital believe that should the average customer’s economic situation continue to improve more upgrades should follow.
The supermarket group's upgraded operating profit forecasts of between £2.6 billion and £2.7 billion, up from £2.5 billion previously, led analysts at the London broker to lift their full-year pre-tax profit guidance by 3%.
“Tesco is a very well-oiled machine, pressing all the right buttons around price, assortment, promotion, availability and general service standards,’ Shore Capital explained.
Pointing out how this effective performance had led to robust market share performance, increasing in the UK by 30 basis points, the investment group added that Tesco was making good progress in the rest of Europe.
One of the key driving forces in Tesco’s improvements has been the result of inflation peaking – hopefully – with a slowdown in food prices expected to ensue.
Shore Cap believes the mix and volumes will improve as a result of inflation slowing – although the broker noted how most players in the industry, including those in the supply chain, don’t expect deflation any time soon.
“Happily reiterating” the stock as a ‘buy’, the UK broker awaits improving customer sentiment before nudging the financial estimates higher in early 2024.
Shares in Tesco are up 3.5% on Wednesday, having opened at around 262.5p.