It’s been a troubling few years for Tesco PLC (LON:TSCO), with price wars, failed expansion plans and, of course, the accounting scandal weighing heavily on the supermarket giant.
There have been better signs more recently though. At the full-year results in April there were encouraging signs of a recovery in the UK and that revival is expected to have continued into the first quarter of 2017.
According to the latest Kantar WorldPanel data, Tesco saw sales rise 1.8% in the 12 weeks to 21 May, with all of the ‘Big Four’ boosted by rising food prices.
That’s not too far off from UBS’s estimates, with the bank expecting total group like-for-like sales growth of 1.7% for the three months ended March.
“If validated, this would represent Tesco's strongest quarter in the past seven years,” said analyst Daniel Ekstein.
Tesco’s stronger performance of late has been driven by a more competitive offering; leveraging its purchasing power to put through lower inflation than some of its peers.
“The Grocer's price survey recently reported three consecutive weeks with Tesco's basket cheaper than Asda, described as 'unprecedented in recent years,” added Ekstein.
“The most effective tool to keep that circle spinning, and solidify Tesco's recover, is price.”
Away from UK numbers, investors will also be keeping an eye out on how Tesco’s international business – which has underwhelmed in the past – has performed. UBS expects sales from abroad to have inched up 0.5% year-on-year.
An update on the Booker Group PLC (LON:BOK) acquisition and the extensive restructuring programme currently taking place would also be welcome – although any word on the former is unlikely given that regulators only recent started a “standard phase 1 review” of the proposed £3.7bn deal.
Housebuilder Bellway to give clues on economic state of the nation after Mayday
Bellway PLC's (LON:BWY) trading statement next Wednesday will give some clues on how Britain’s economic future will pan out after the UK election result.
In March, the group reported robust numbers for the half year to end January, in which it reported record completions for the half and that ongoing customer demand was strong, and the market will want to see if momentum has continued.
Pre -tax profits were up 9.3% to £247mln in the last half year, on revenues, which were 5.9% higher at £1.14bn.
Broker Liberum noted that increased uncertainty following the UK vote would be expected to slow house purchases and make the sector less appealing. This was borne out on Friday, when shares in the builders dropped.
But analyst Charlie Campbell added the sector still has strong underpinnings, and government policy was now likely to move away from austerity towards fiscal expansion.
That would favour house builders who can lift volumes and those involved in social housing, said the broker. Commentators’ belief that the interest rate hike will now be pushed back until 2020 is also likely to provide support to the sector, in terms of mortgage lending.
Liberum, for example, sees relative underperformance from the large returners, like Barratt Developments (LON:BDEV), which it rates ' sell' but relative outperformance from 'smaller growers', like Bellway (LON:BWY).
Political uncertainty hangs over Capita
The hung parliament vote in this week’s general election will probably not be good news for outsourcing group Capita PLC (LON:CPI), one of the largest private sector employers in the UK.
With trading weakness impacting performance in the run-up to the election, investors will be looking for any comments on the outlook when Capita delivers a fourth quarter trading update on Tuesday.
Investors will also be seeking any news on potential disposals with Capita’s shares jumping last month on unconfirmed rumours suggesting that the group is in advanced talks about the sale of its recruitment division.
READ: Capita shares jump on rumours of talks about sale of recruitment division
That disposal chatter followed other restructuring moves at the group, which delivered a series of profit warnings last year, with Capita revealing last December that it was seeking a buyer for its asset services division.
And lastly investors will look for any news of a replacement for chief executive Andy Parker, who announced that he is to step down this autumn in March soon after it was announced that the firm had lost its blue chip status.
Merlin keen to get currency tailwind
Theme Park owner Merlin Entertainments plc (LON:MERL) has seen growth in the number of visitors to its UK attractions as a weaker pound supports tourism.
The operator of Alton Towers, Legoland and Thorpe Park will update the market on its second quarter trading on Tuesday and currency tailwinds may have given its results a further boost.
Analysts predict the pound has further to fall on political uncertainty and Brexit worries after the general election led to a hung parliament.
A decline in the pound following last June’s Brexit vote makes it cheaper for overseas travellers to flock to Merlin’s theme parks. A poor foreign exchange rate for Britons has also led to more ‘staycations’.
However, the recent terrorist attacks in London and Manchester may deter visitors.
“Investors will also be interested in any comments on expansion plans in China as well as expectations for the second half of the year given the recent terrorist attacks in London,” according to the Share Centre.
In March, Merlin reported a 3.5% increase in 2016 pre-tax profits to £277mln and a 11.7% rise in revenue to £1.45bn as visitor numbers at its attractions rose by 1.3% to 65.1mln.
The group said recovery was well underway at Alton Towers, which was impacted by a crash on its Smiler roller-coaster in June 2015, with strong performances from its wider Resort Theme Parks estate.
Merlin’s chief executive officer, Nick Varney, said he remained “confident of a good performance in the year ahead”.
Announcements due:
Monday 12
Interim: Servoca PLC (LON:SVCA)
Finals: MITIE Group PLC (LON:MTO); Motorpoint Group Plc (LON:MOTR)
Tuesday 13
Interims: Ashtead Group PLC (LON:AHT); Oxford Biodynamics PLC (LON:OBD)
Finals: Abzena plc (LON:ABZA); Park Group PLC (LON:PKG); Trifast PLC (LON:TRI); Telecom plus PLC (LON:TEP); Halma PLC (LON:HLMA); Iomart Group PLC (LON:IOM); CML Microsystems PLC (LON:CML); FIH Group Plc (LON:FIH)
Evgen Pharma Plc (LON:EVG)
Trading Statement: Merlin Entertainments PLC (LON:MERL); Capita Group (The) PLC (LON:CPI)
Wednesday 14
Interim: Elegant Hotels Group Plc (LON:EHG)
Finals: Charles Stanley Group PLC (LON:CAY);Biffa PLC(LON:BIFF); Severfield (LON:SFR); Norcros PLC (LON:NXR); Castings PLC (LON:CGS); Enteq Upstream (LON:NTQ)
Trading Statement: Bellway PLC (LON:BWY); The Gym Group Plc (LON:GYM)
Thursday 15
Interim: Safestore Holdings PLC (LON:SAFE)
Finals: Majestic Wine PLC (LON:WINE); Consort Medical PLC (LON:CSRT)
Trading Statements: Drax Group PLC (LON:DRX); PZ Cussons PLC (LON:PZC)
Friday 16
Final: Record PLC (LON:REC)
Trading Statement: Tesco PLC (LON:TSCO)