Tesco^ (TSCO, House Stock at 286p) - High-class management, high-class equity

H1: consensus beat and annual guidance upgrade lifts investor sentiment!

In H1 FY23/24, Tesco’s sales and operating profit were ahead of the market expectations – largely attributable to the UK & ROI segment. The company is well-placed to preserve its market share gains and profitability. The weakness in CE is non-structural. The improvement in the annual outlook (for retail operating profit and FCF) is reassuring. We continue to see Tesco as one of the healthiest of the lot. We will increase our financial estimates slightly. Positive recommendation maintained.

Initial Equity Trading Comments - 14 August 2023

Addendum - Initial Equity Trading Comments - 18 July 2023

Sainsbury (J) - (SBRY, House Stock, 262p) - Q1 FY24F trading statement preview - no guidance change anticipated

Decent start to FY23/24!

Tesco’s Q1 trading performance was slightly ahead of the market’s expectations. The group’s sales grew 8.2%, 190bp ahead of the consensus. While the UK & ROI and Booker segments outperformed the street’s expectations by 200bp and 540bp, respectively, Central Europe was much softer at +1.1% yoy. We continue to see Tesco as the best-placed full-value grocer in the UK to defend its market share. Central Europe softness is also non-structural. Management has maintained the annual guidance. We retain

Decent end to FY22/23; momentum to moderate in FY23/24

Tesco’s preliminary FY22/23 performance was slightly ahead of our as well as the market’s expectations. The group’s lfl sales came in at +5.1% (+94bp vs consensus), with positive momentum in all business segments. The adjusted operating profit of £2,630m (-6.9% yoy) was in line with the street’s expectations. For FY23/24, we expect Tesco’s top-line growth to moderate, volume to recover slightly and profitability to decline slightly. We maintain our positive stock recommendation.

SHORE CAPITAL - Initial Trading Comments - 13 March 2023

Strong Christmas underpins Q3 performance; testing times ahead!

Tesco’s trading performance for the Q3 plus Christmas (19 weeks ended 7 January 2023) was broadly in line with our expectations. The Group’s lfl sales grew 6.4% during the period, with all retail segments clocking robust momentum. The management has confirmed the annual profit target: operating profit for the retail business at £2.4-2.5bn, £120-160m for the banking operations and group FCF of at least £1.8bn. Despite announcing a good start to 2023, Tesco’s FY23/24 earnings are likely to remain

Better placed to tackle the ‘Discounter Juggernaut’

Tesco’s share price is down >25% YTD, plagued by weakening consumer sentiment and increased earnings pressure in the UK. Even the strong half-yearly performance could not lift investor sentiment. We expect consumers to incline more towards the German discounters in the near-term, looking to cut corners wherever possible. The recent rebound at close competitor Asda (lesser market share erosion) complicates the matter further. While Tesco’s mid/long-term fundamentals and valuation remains attracti