Tesco’s latest quarterly results had “a tinge of disappointment”, one industry analyst said this morning (8 December) after the UK’s largest retailer saw growth in domestic sales slow.
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Excluding fuel, Tesco booked a 2.8% rise in like-for-like sales in the UK for the three months to 28 November, compared to growth of 3.1% in the company’s second quarter.
The slowing UK like-for-likes came despite Tesco’s investment behind its Clubcard loyalty scheme in a bid to lure consumers.
Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said the second half of Tesco’s fiscal year had been expected to be stronger, yet the numbers were “slightly shy of estimates”.
“The impending Christmas period will now take on extra importance for overall figures, whilst management comments were still relatively guarded,” he said.
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By GlobalDataNonetheless, Hunter said growth “does continue” and some market share has been regained through the Clubcard promotion.
“In all, despite the markdown of the shares in early trade, the market view remains tentatively positive on the company. The shares have risen 34% over the last year – and 20% in the last six months alone – with the main headwind likely to remain the high hopes which investors have for continued sales outperformance,” Hunter said.
However, Shore Capital analyst Clive Black said Tesco’s results were “very much in-line with expectations”.
He added that Tesco’s UK performance is now “much closer to that of its major peers, or more to the point, its peers have slowed to the level of Tesco”.
“In the US, where Fresh & Easy sales have risen 37.4%, the economy remains challenging, suggesting that the improvement in like-for-like sales is more to do with management action than the economic context,” Black insisted.
“We sense that Tesco is quietly getting on with things to good effect Stateside. All in all, the language management uses to describe performance and process at present leads us to be more optimistic about European and US prospects in 2010.”
Shore Capital reiterated its ‘buy’ stance on Tesco stock and added that 2010 could be a “materially better year” as economic headwinds ease.
Tesco’s shares were down 2.6% at 424.4p at 12.33 GMT today.
