The week ends with a focus on shopping as Tesco PLC (LON:TSCO) is releasing a first-quarter trading statement, while in terms of macro we have the latest UK retail sales figures.
The supermarket giant had been reclaiming market share from the German hard-discounters Aldi and Lidl, neither of which has an online service worthy of the name, but in the 12 weeks to the middle of May, its market share eased a little.
Tesco said it expects sales to be much steadier this year and some of the additional sales volumes gained in the core UK market will fall away as COVID-19 restrictions ease.
“But we expect a strong recovery in profitability and retail free cash flow as the majority of the additional costs incurred as a result of the pandemic in the 2020/21 financial year will not be repeated,” the company said at the time of its full-year results in April.
As for the first-quarter results, the comparatives will be tough because a year ago we were in the grip of stockpile fever.
“Analysts will be watching ... how Tesco’s Aldi Price Match and Clubcard Price schemes are faring. They helped the company take share in a fiercely competitive market last year. According to data from Kantar Worldpanel, Tesco’s market share reached 27.4% in the 12 weeks to 18 April, its highest level since January 2019, although that figure then receded to 27% in the 12 weeks to 19 May,” AJ Bell’s investment director Russ Mould observed.
“Profits should at least be helped by a decrease in direct costs to the business from COVID, which came to £892 million in the year to February 2021,” Mould added.
Further improvement in sight for retail sales
Looking at retail sales, there has been a slow recovery since the big 8.2% decline seen in the January numbers, mostly due to the national lockdown.
We have seen a 2.2% rise in February and then a 5.1% rise in March, but April brought a solid pickup with a 9.2% jump after the first step out of restrictions.
Further relaxation is likely to have given an additional boost to the May numbers, analysts said, considering the British Retail Consortium said May sales rose at their best rate since the pandemic struck the UK.
“We could also have seen some forward bookings for hotel accommodation in the leadup to the May reopening as consumers book time away over the half term break. If the recent May services PMIs are any guide, we could well still see a fairly robust month for consumer spending in May,” analysts at CMC Markets said.
Significant announcements expected for Friday June 18:
Trading announcements: Tesco PLC (LON:TSCO)
Finals: Inspecs Group PLC (LON:SPEC)
Economic data: UK retail sales