Tesco PLC (LSE:TSCO) should well have enjoyed a strong final quarter, leaving the focus on full-year figures on costs, pricing and potentially “prudent” guidance, UBS has said.
Flagging Tesco a “top pick” ahead of final results on April 10, UBS said debates would centre on wage and national insurance-fuelled cost pressures, pricing and market share.
Some £450 million of Budget-related costs could be offset by savings, analysts noted, with wider inflationary pressure leaving the door open for Tesco to outperform on volumes.
Industry data from the likes of Kantar has shown Tesco further strengthening its grip on the grocery market in recent months, which UBS said alluded to a strong final quarter.
UK like-for-like volumes were seen growing 4% in the final three months of the year, aiding full-year pre-tax earnings from its retail division of £2.95 billion.
Looking ahead, UBS highlighted a weak macroeconomic outlook, muted consumer confidence and “slight competitive tension”.
This may leave Tesco issuing “prudent” guidance of around £3 billion in retail earnings, analysts added, offering “headroom to beat it”.
UBS is a 'buyer' of the stock up to 410.