Tesco reported a 1.5% fall in UK like-for-like sales today, in line with market expectation. The City’s reaction was mixed.
“Tesco’s UK reset continues apace. Having recently completed the roll-out of extra labour to its fresh departments across its 700 large stores, it has now overlaid a second phase of additional labour in its ambient departments in the original 200 large store pilots. Among a numbers of initiatives, we believe the results of the first personalised Clubcard offers have been beneficial for customers, suppliers and Tesco alike.” – Nick Coulter, Nomura
“The Q1 sales numbers do not provide significant support for our view that Tesco is fixable. Investors don’t have to look very deeply into the numbers to see some disappointing sales growth, despite accelerating investment. The bears will devour this continued underperformance but, in truth, we are not expecting a swift rebound. Turning Tesco UK around is all about doing 1,000 things, 1% better.” – Philip Dorgan, Panmure Gordon
“We continue to believe that Tesco is still a strong business with an unassailable market leading position in the UK that has temporarily come off the rails. Management, in our view, should not change its strategy significantly either in the UK or overseas. It makes sense to invest more in service and in the ranges, particularly in fresh produce, but we do not believe management should be forced into selling overseas operations or its banks subsidiary. Nevertheless it is hard to see anything other than pedestrian earnings growth from the company over the next three years.” – Freddie George, Seymour Pierce
“The Tesco recovery story has got off to a slow start, with Q1 LFL sales still down in the UK, by the expected 1.5%. But the period of the 13 weeks to May 26 had tough April comps and missed the key Jubilee Week, so Tesco insist that things have gone to plan and that the momentum of change in the business is accelerating. All eyes are now on what Sainsbury will say on Wednesday, but Tesco seem to have Morrisons and Asdamore in their sights. Under-pressure chief executive Phil Clarke has been hyper-active, with his sleeves rolled up sorting out the UK, as well as addressing problems elsewhere in the group.” – Nick Bubb, Independent
“We see this as a steady statement suggesting stabilisation is coming through in the UK. For the ‘uber bears’ there is no warning, which is an important foundation to the rebuilding of Tesco’s investment credentials. We see the UK position as in-line with our expectations with a slightly better out-turn in its core international markets; the slowdown in like-for-like at Fresh & Easy is more than we anticipated though, which will add further pressure on the California team.” – Clive Black, Shore Capital