RSS Feed

Related Articles

Related Categories

Tesco reports sales growth across the business for second consecutive quarter

23rd June 2016 Print

As Tesco updates the market Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors.

“Tesco reported some optimistic results this morning as it delivered a second quarter of positive like-for-like sales growth across all parts of the group in what remains a challenging market with sustained deflation. Investors should also note that the supermarket announced in the update that it is selling the Harris and Hoole coffee chain to Caffe Nero, with the group stating that the move will allow it to have a ‘greater focus on its core UK business’.

“The sale is another sign that Tesco is streamlining and restructuring its business.  Investors will be aware that it recently announced that it is off-loading Dobbies at a profit as well as The Turkish Kipa stores and Giraffe Restaurants. The move indicates that the company is improving its focus on its core UK business and its customers to help it fight back against Lidl, Aldi and other established names.

“Despite the constructive signs, we believe that long suffering investors will need to be patient as the environment remains challenging. Fierce price competition and promotions are likely to remain a squeeze on margins for some time and the revised strategy is going to take time to implement. We subsequently recommend Tesco as a ‘hold’ for medium risk investors seeking growth.

“For those interested in the sector, our preferred company is Sainsbury’s due to its stronger balance sheet.”