As Tesco updates the market, Graham Spooner, investment research analyst at The Share Centre, explains what it means for investor.
Tesco posts 10th consecutive quarter of improved sales as Booker provides boost
- Sales grew 1.8% in first quarter compared to 1% in same period last year despite snow in Spring
- Shares in the supermarket up 2.2% in early morning trading and over 20% since April
- The Share Centre recommends Tesco as a ‘hold’ for medium risk investors
This morning, Tesco posted a first quarter trading update in which it reported further like for like sales growth of 1.8%, compared to 1% of growth in the same period last year. This means the group has achieved a tenth consecutive quarter of improved sales and is going someway of leaving its troubled years behind. Investors should also be reassured by the positive uplift given the company noted performance was hampered in March by heavy snow that meant less people went out to get their shopping.
The group’s long-term restructuring plan appears to be working with its customers and the ‘joining forces’ for the Booker acquisition is progressing well. Indeed, Booker saw like for like sales rise by 14.3% over the period and Chief Executive Dave Lewis emphasised his delight with the initial headway. Lewis also reiterated that Tesco remains focused on delivering the synergy benefits that the merger brings.
Investors should appreciate that the company is a quarter of the way through its re-launch of its own brand products and have increased the focus on improving their customer offering.
It is also benefitting again from its sheer size and buying power, with around 27.7% of the market share.
Long suffering investors could be set to benefit further, and of late, analysts have been turning more positive on the group. However, in a fast changing retail environment progress is likely to be slow. There’s no escaping that despite improved sales and clear signs of positive momentum Tesco is operating in a crowded and hugely competitive market place and opposition, in the form of the discounters and the impending merger of J Sainsbury and Asda, will be snapping at their heels. Subsequently, we continue to maintain our ‘hold’ recommendation for medium risk investors.
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