It’s been a busy second half for Tesco PLC (LON:TSCO), which has endured pricing pressures, a big fine and an uncertain economic outlook – all while it tries to complete an acquisition. The consensus in the City is for the supermarket giant to post an annual pre-tax profit of around £784mln on revenues of £55.7bn next week Even with the various issues, analysts at Macquarie think investors will be in for a pleasant surprise. “We are firm buyers of Tesco into the full-year update. We expect a beat and look for a confident outlook.” The latest Kantar Worldpanel UK grocery market data wouldn’t appear to back up that positivity though. It suggested.
Sales dropping off
Tesco’s sales and market shares dropped off in the last 12 months, as German discounters Aldi and Lidl marched on. Increasing inflation has pressurised margins for nearly all UK retailers post-Brexit, not just Tesco, so that will be in focus on Tuesday, especially given the recent stand-offs the company has had with the likes of Unilever PLC (LON:ULVR) and Heineken. According to some in the City, inflation could well drag on the top line, although Macquarie reckons cost increases have been passed on to consumers so it shouldn’t act as too much of a headwind on margins. At the end of March, the UK grocery leader was hit with a £129mln fine as part of the accounting scandal in 2014 when Tesco was shown to have overstated profits. Three of the four challenges relating to the saga have now been settled, with only possible lawsuits from European- based investors now hanging over it. Shareholders will be hoping that the issue is put to bed once and for all in the not too distant future.
Booker deal uncertainty
Elsewhere, the retailer is also going through the process of acquiring food wholesaler Booker Group PLC (LON:BOK) for £3.7bn, which is waiting on final approval from both shareholders and the Competition and Markets Authority (CMA). There had been murmurs of discontent among some investors – notably Schroders and Artisan Partners – who have raised concerns over the price being paid. A recent survey carried out by Bernstein seems to have put an end to those worries though, estimating that 70% of Tesco shareholders will back the deal in an upcoming vote. Investors will be looking out for any news on further progress with the deal and/ or further benefits it now expects to realise as a result.
Wednesday 12 April
Interims: Carrs Group Plc (LON:CARR); WH Smith PLC (LON:SMWH)
Finals: Tesco PLC(LON:TSCO)
AGM/EGM: TMT Investments (LON:TMT), Rio Tinto PLC (LON :RIO), Hunting (LON:HTG)
Trading statement: Dunelm Group PLC (LON:DNLM), PageGroup Plc (LON:PAGE)