Tesco set to reveal rise in profits as recovery continues

Tesco is expected to report a rise in full year profits this week but the supermarket faces growing shareholder scrutiny of its proposed £3.7bn takeover of Booker.

Sunday, 9th April 2017, 2:00 pm
Updated Tuesday, 9th May 2017, 7:02 pm
Tesco is expected to report a rise in full year profits

Analysts at HSBC expect the grocery giant to report annual pre-tax profits of £464m on Wednesday, up from £162m last year, as chief executive Dave Lewis continues to lead the group’s recovery.

Total sales, including international, are forecast to remain broadly flat at £54.8bn in the year to February.

Mr Lewis has been hailed for beginning to turn Tesco around after the disastrous reign of his predecessor, Philip Clarke –which saw profits slide, market share eroded and an accounting scandal dog the supermarket giant.

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HSBC’s David McCarthy said: “Tesco has made good progress across a wide spectrum. Ranges have been simplified, volume growth has been strong and a major cost-cutting programme has commenced. At the same time, there is much going on behind the scenes.

“Tesco outperformed the market heading into Christmas but has slipped back below the industry average. Nevertheless Tesco is the second best performer of the ‘Big 4’ this year in sales growth (lagging Morrisons) and is the best performer in absolute terms.”

However, Tesco’s attempted merger with wholesaler Booker is expected to overshadow the results after a number of investors spoke out against the deal. Both Schroders and Artisan, which own nine per cent of Tesco, have publicly said that the deal should be called off, insisting that the price is too high and that a merger will distract from the core business. However, others, such as Old Mutual Global Investors, have backed the deal.

Bernstein analyst Bruno Monteyne said: “If Schroders and Artisan want to block the deal, it will be hard but not unsurmountable. There are sufficient large holders that haven’t disclosed their view that could sway this estimate.”