Shore Capital has rated Tesco PLC, LSE:TSCO’s trading statements as “sound”, and has left unchanged its profit forecasts in fiscal 2023.
However, the UK’s macroeconomic outlook remains uncertain. This broker is retaining its neutral stance on stock trading despite positive results.
Analysts said the update was good considering that it was against several years of robust comparatives from Tesco. This reflected a clearly defined plan and good execution throughout,
Similar-for-like sales (ex–fuel) increased 6.4% over the 5.3% consensus. Shore Capital highlighted Clubcard’s important dynamic. Customers redeeming 4mln coupons and growth in Tesco UK’s internet activity, with 13% participation, meant notable share gains.
According to the broker, Booker was the highlight of the Tesco family’s show, noting that tough comparatives resulted in notable share gains in catering (+19.2%).
Shore stated that “All in all, across-the board effective execution in my view.”
It does raise concerns, especially with the current macroeconomic environment.
“Until inflation slows down, so that household finances are more secure and consumer confidence rises, we are also concerned about aggregate demand and the strength of our financial projections for FY24.”
This is why the broker has resisted taking a more positive position on Tesco at the moment. It reiterated its ‘hold’ recommendation, suggesting shares may move “sideways” in the short term.