Tesco PLC (LSE:TSCO)'s full-year results were roundly applauded by City brokers today, with analysts from Jefferies, Barclays, and interactive investor highlighting the supermarket chain’s resilient sales and earnings growth
Group revenues grew by 7.4% year on year and retail operating profit by 18.8% to £2.76 billion, thanks to easing inflationary pressures.
Chief executive Ken Murphy said Tesco had “worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year”, though the absence of clear sales volume data made the rate of price inflation passthrough to the customer unclear (though the group noted “three consecutive quarters of volume growth”.)
Jefferies highlighted Tesco’s strong market share progress in the UK and adjusted leverage well below the target range, while Barclays highlighted its strong cash position.
Tesco announced a £1 billion share buyback programme, partially funded by a special dividend from the Tesco Bank disposal, which is a testament to the “very material amounts of cash” the group is generating “despite its significant investment in the proposition and Infrastructure”.
Barclays kept forward earnings forecasts steady at £2.86 billion, but suggested “scope for guidance raises later in the year if current market share momentum is maintained”.
Tesco remains the "pre-eminent grocer of the British aisles," said interactive investor’s Richard Hunter.
“Its appetite for lowering prices for customers is enabled by its sheer scale and strength, falling food inflation, and a significant cost reduction,” said Hunter. “In turn, this creates something of a virtuous circle, with more customers attracted by the likes of the group’s Aldi Price Match and Low Everyday Prices and Clubcard Prices.”
Jefferies has a buy rating on the stock with a 350p price target, as does Barclays.
Shares were sent 4% higher to 299p following the preliminary results.