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Tesco – On Track For Guidance But Starting To See Consumer Behaviours Shift

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Tesco PLC (LON:TSCO)’s first quarter group retail sales, excluding fuel, grew 2.0% on a like-for-like (LFL) basis, to £13.6bn. Compared to pre-pandemic levels that reflects LFL growth of 9.9%. Year-on-year, Central Europe saw the largest LFL growth where the group continues to grow market share.

Ken Murphy, CEO, said: “we are seeing some early indications of changing customer behaviour as a result of the inflationary environment”. Despite which, guidance on profit and cash remains unchanged.

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Q1 2022 hedge fund letters, conferences and more

The shares were flat following the announcement.

Tesco's Earnings

Matt Britzman, Equity Analyst at Hargreaves Lansdown

“After a slew of retailers warned on profits it’s encouraging to see Tesco keeping guidance unchanged. That’s not to say they’re immune to the current pressures, back in April we heard consumer spending wasn’t showing signs of weakness yet, but it always felt like it was round the corner.

Those cost pressures are now starting to take their toll and management called out changing behaviours today, that puts more emphasis on grocers offering a strong value proposition which is an area Tesco deliver well on. Aldi Price Match and Low Everyday Prices are being rolled out further, with distribution up shy of 20% from last year, that’s helping keep prices at a level consumers can stomach and the group’s snapping up market share as a result.”

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