Investors haven’t heard from Dave Lewis and co for a few months and they’ve got a bit twitchy as a result: shares are down more than 10% since October’s half-year results were published.
Analysts reckon the UK’s largest food retailer has the potential to surprise the market, but Wm Morrison Supermarkets PLC (LON:MRW) and J Sainsbury PLC’s (LON:SBRY) results haven’t filled the market with confidence.
Sainsbury’s indirectly pointed the finger at Aldi and Lidl for its Christmas sales slump, while Morrisons warned of a “change in consumer behaviour”, claiming that shoppers are seeking out bargains like never before.
Analysts always thought the German discounters would boost their market share over the holidays as cash-strapped consumers tighten their purse strings and Tesco is widely expected to acknowledge their growing threat on Thursday.
But the City still thinks the FTSE 100 group could surprise on the upside with its numbers. At the least, they expect Tesco to be the top performer out of the ‘Big Four’, with sales growth of 1.5%.
“Whilst the overall market has slowed, we remain sanguine on progress in Tesco's core UK business – the competitive offer is as sharp as it's been in years and mix benefits (supplier PL rationalisation; Finest*; General Merchandise streamlining) should drive margin rebuild,” said UBS in a note.
The investment bank added: “We think Christmas could deliver a positive UK like-for-like surprise vs. market expectations.”
Tesco shares were up 1.9% on Wednesday afternoon to 212p.