Tesco: What the analysts say

“The signs were clear that Tesco would come out ahead of Sainsbury’s in like-for-like sales growth at Xmas, via the latest Kantar data, and that is indeed the case, with a 1.8% like-for-like rise playing  up 0.9%, although Sainsbury’s would be quick to point out that their reporting period was 14 weeks, not six weeks. But Tesco online grocery is really doing well, with sales up by 18%, and Tesco non-food has also improved.” – Nick Bubb, independent analyst

“Tesco has reported the strongest like-for-like sales growth of the Big Four over the Christmas period, helped by the shorter period vis-á-vis Sainsbury. It did of course have the softest comparison, but investors should be encouraged by what they hear and it sets the scene nicely for a year of significant strategic change.” – Philip Dorgan, Panmure Gordon

“Christmas was more promotional than last year, as planned, but this was very targeted and profit-effective and not just blanket vouchering. Private label grew more strongly than national brands, with Everyday Value and Finest showing particularly strong growth.” – James Collins, Deutsche Bank

“We regard this statement as an important milestone in Tesco’s development. Tangible signs of stabilisation in the UK are emerging, the diagnosis of the company’s issues looks increasingly accurate and focus will now shift to the prelims and the next stages in the strategy to reduce capital intensity.” – Mike Tattersall, UBS

“Much has been made of the underlying factors driving this expected improvement in UK like-for-like performance. Indeed, this period saw Tesco continue to flex its considerable financial muscle, with notably increased levels of promotional activity and discounting, especially in the form of couponing. While such a strategy can only ever represent a short term solution to Tesco’s problems in the UK, in our view it has been essential in regaining the impetus.

“Reflecting trends both in grocery, and across retail more generally, online represented a significant growth lever over Christmas; Tesco’s online grocery sales increasing 18%. Perhaps most interesting is the fact that online grocery click-and-collect – now available in 140 of Tesco’s stores – represented 5% of total online grocery. The grocers face a significant challenge to evolve their online food operations to the extent that they reduce the negative impact on overall profitably. Tesco’s introduction of grocery drive-through click & collect, and the growing customer utilisation of this service, is a step in the right direction.” – George Scott, Conlumino

“We are not fans of food retailing having negative recommendations on all the major players and continue to see much more interesting investment opportunities in non-food. We expect an equally competitive 2013 for the UK food retail sub-sector with inflation coming back into the system and no let up in the pressure on consumer spending.” – Kate Calvert, Seymour Pierce

“We believe that it should be reiterated that chief executive, Philip Clarke’s plan to re-energise Tesco UK is a three-year one, and so whilst much work has been undertaken and progress made (for example, in-store service levels and fresh food ranging), there remains a lot more to do particularly in mainstream own-label, non-food and store configurations.

“Making substantial changes at an organisation the size of Tesco takes time; as is so clearly evident with respect to the initiatives management has put in place to stabilise and improve the core chain.” – Clive Black, Shore Capital