Half-year results from Tesco PLC (LSE:TSCO) this coming Wednesday should give us a fuller idea of the state of play in the supermarket sector after rival Morrisons blamed a profits slump in the past week on subdued consumers and unprecedented inflationary pressures.
This ramped up uncertainty around the sector and the wider economy, which has far from abated after the government’s misfiring 'mini budget'.
A fall in the discretionary spending power of households as a result of the energy crisis prompted Jefferies to recently downgrade a number of UK retailers, including Tesco and rival Sainsbury.
The broker said “these are all resilient businesses with strong finances. But short term prospects look tough.”
However, analysts at JPMorgan said Tesco is better equipped to deal with a challenging consumer environment than its nearest rival, while Shore Capital said Britain's largest grocery is executing its strategy well.
Shore Cap analyst Clive Black has forecast a first-half profit of £948mln, with just shy of £2bn for the full year, which would represent a decline on a year ago.
In its first-quarter update, Tesco kept its profit and cash guidance unchanged, expecting underlying operating profit in the realm of £2.5bn to £2.8bn assuming a return to normal consumer behaviour.
The share price has tumbled so far this year, like most of its FTSE peers, down 30% to 203p so a reassuring update could prove a point of difference.
Shareholder returns will also be on the radar of many investors, with a £1.05bn buyback pledged to be completed by April, with £300mln completed at last count, while the last dividend hike at the full-year results was a whopping 19%.