Tesco shares perked up on Friday after the supermarket reaffirmed it profit guidance for the year as the group continued to grow market share.
Shares rose over 1% on Friday as Tesco reiterated guidance of adjusted operating profit of £2.8bn for the year after group sales grew 4.5% in the 13 weeks ended 25 May 2024.
“Tesco has maintained its profit guidance in this morning’s trading statement as underlying UK sales for the supermarket rose by 4.6% in the first quarter,” said Mark Crouch, analyst at investment platform eToro.
“Despite higher inflation vexing the sector, Tesco has stood fast and knuckled down on quality and value. By utilising the Clubcard scheme and offering a wider range of food products, Tesco managed to increase their market share in 2024.”
The key for investors is top-line growth. It’s accepted that there is little that can be done with margins in the current environment, so the main source of earnings growth will be top-line expansion. In this respect, there is a lot to encourage investors in today’s update with the group using its loyalty scheme to fight off the threat of the discounters.
“Tesco has done exceptionally well to grow market share given rising competition. Its full-line offering sets it apart from the likes of Aldi, and its product proposition puts it ahead of other big names,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown
“Tesco’s enormous scale means it operates more like a utility in some respects – everyone needs to put dinner on the table and an increasing number of customers are buying that at a Tesco. That helps underpin a reasonably generous dividend yield, too. Moving forwards, investors will want to see further growth kicked out from wholesaler Booker – as well as a clearer understanding on what the next chapter looks like for food.”
Tesco will report interim results on Thursday 3 October 2024.
