Tesco sales expected to fall as other results closely watched

Tesco boss Philip Clarke's turnaround plans will be under fresh scrutiny on Wednesday when the supermarket is expected to reveal a fall in UK sales


Latest trading figures from Tesco and half-year results from Greene King and Mulberry will be closely watched next week.

Tesco boss Philip Clarke’s turnaround plans will be under fresh scrutiny on Wednesday when the supermarket is expected to reveal a fall in UK sales.

Analysts are predicting like-for-like sales to have dropped by around 1.5% in its third quarter, marking a setback for the group after it managed to halt declines in the previous three months, when sales remained flat.

Its own brokers, Deutsche Bank, have raised the alarm over recent trading and cut forecasts for annual underlying earnings. Mr Clarke will face tough questions over his £1 billion plan to reinvigorate trading as the group enters its peak Christmas trading period. Some major investors have already reportedly raised concerns over the chain’s management team following a dire set of first half figures.

Tesco’s interim profits tumbled by almost a quarter to £1.39 billion after underlying sales declines in the UK and every one of its overseas markets.

The group insisted its turnaround efforts were paying off with an improved performance in the UK, where trading profits rose 1.5% to £1.13 billion in the six months to August 24.

But the focus fell on steep profit declines at its European and Asian businesses - once the driving force behind the group.

Signs of a relapse in the UK will add to its woes. Deutsche Bank is pencilling in a 1.5% fall in UK sales and now believes group underlying earnings over the current financial year will fall 3% to £3.35 million.

Shore Capital is also estimating a decline of between 1% to 2% in what they predict will be a “subdued” update.

But they said all of the “big four” chains have been squeezed in recent weeks by a shift among shoppers from middle-market retailers to discounters such as Aldi and Lidl, as well as premium players Marks & Spencer and Waitrose.

According to data from Kantar Worldpanel, Tesco, Asda, Sainsbury’s and Morrisons saw their market share drop year-on-year in the 12 weeks to November 10.

First half figures from luxury handbag maker Mulberry on Thursday will be looked to for signs of improvement as the group seeks to recover from plunging annual profits and falling sales.

The firm was left nursing a slump in full-year profits of more than a quarter to £26 million after spending heavily on overseas expansion, while a 16% slide in wholesale revenues wiped out a 6% sales rise in its own stores. It was rocked further after the resignation of creative director Emma Hill, who is credited with the transformation that has seen Mulberry become a celebrity must-have brand.But there were signs of progress as the firm said retail like-for-like sales had risen by 6% in the first 10 weeks of the new financial year, while it hoped to halt wholesale declines with “modest” growth over the year as a whole.

Pub group and brewer Greene King is expected to report back on a robust first half following the summer heatwave and as consumers continue to eat and drink out despite the squeeze on personal finances.

The firm - whose brands include Hungry Horse and Loch Fyne as well as beers such as Old Speckled Hen and Abbot Ale - saw sales growth pick up pace in its core retail estate of 1,000 managed pubs during the first 18 weeks of its financial year, to 4.6% from 2.3% in the previous year. Analysts at Deutsche Bank predict the sales momentum will have been maintained throughout the first half, pencilling in a rise of around 4% when the group reports on Tuesday.

They believe interim underlying pre-tax profits will rise by 8% to £31 million. Rivals Punch Taverns and Mitchells & Butlers have reported back with decent figures for recent trading.


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