Tesco to face questions over consumer demand concerns despite ‘rise in sales’
The grocery giant is among the retailers facing huge pressure from shoppers considering switching to German discounter rivals Aldi and Lidl.
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Your support makes all the difference.Tesco is expected to reveal higher sales over the first half of the year despite pressure on consumer budgets.
The grocery giant is among the retailers facing huge pressure from shoppers considering switching to German discounter rivals Aldi and Lidl to bring down the cost of their weekly shops.
So far this year, Tesco has been the most resilient of the traditional Big Four supermarkets – which also include Sainsbury’s, Asda and Morrisons – but shareholders will be keen to find out how demand is faring as the cost-of-living crisis continues to worsen for households.
The company will update the market on current trading when it unveils its performance for the first half of its financial year on Wednesday October 5.
Analysts are expecting the supermarket chain to post sales of £31.2 billion for the period, compared with £30.4 billion a year ago, according to experts at AJ Bell.
In June, bosses at Tesco said it saw total sales jump 2% to £13.6 billion over the quarter to March.
It said investment to keep prices low, including its Aldi Price Match programme, has helped it win market share from its biggest rivals.
Figures from Kantar show Tesco sales increased by around 1.9% over the 12 weeks to September 5.
However, it lagged some way behind the growth seen by Aldi and Lidl, which saw increases of 18.7% and 20.9% respectively for the period.
The boom in demand from customers seeking cheaper products in response to higher household bills helped Aldi leapfrog Morrisons to become the UK’s fourth largest supermarket for the first time.
“Sales at Tesco’s supermarkets have showed resilience, particularly in Europe, but as consumers start trading down to cheaper alternatives, we’d like to see what impact this has had on sales at the half-year mark,” said Charlie Williams, equity research assistant at Hargreaves Lansdown.
“Management continues to expect full-year underlying operating profit in the realm of £2.5 billion to £2.8 billion, but this assumes a return-to-normal consumer behaviour.”
Investors will also be keen for an update on the group’s “save to invest” programme, which has been designed to save roughly £1 billion over the next three years.
As pressure from continued cost rises continues to weigh on the company, the market will be eager to see how resilient the firm’s finances will be in the longer term.