Tesco ready to respond to cost-cutting at Sainsbury’s

TESCO boss David Lewis will be hoping for a positive reception from the City on Wednesday when he unveils the supermarket’s latest halfyear results.

Back in June, the chief executive impressed analysts at a Capital Markets Day where he laid out his vision for the future of the grocer.

He talked up plans for innovation, including Tesco Finest-only stores, new sites in international markets and a steady focus on cutting costs, whilst maintaining profits. However, as with other supermarkets, the boss is expected to reveal a tough set of numbers for the summer months due to last year’s heatwave and Fifa World Cup causing unfavourable comparisons.

Analysts predict like-for-like sales in the UK will be flat, with total sales down 0.1 per cent. Strip out Ireland, and predicted like-for-likes are -0.5 per cent.

Operating profits before one-off costs are set to hit £999million in the UK and Ireland, with £1.33billion for the entire group.

Clive Black, retail analyst at Shore Capital, said he expects to see Tesco focus on “wider UK trade over the summer months, where comparatives have been challenging, market activity levels low and competitive intensity – including the greater investment in the proportion from Sainsbury’s – high, is likely to be a key area of focus”.

He added: “In this respect we sense group CEO, Dave Lewis, will be highlighting the ‘quantum of UK sales’, rather than over-focusing upon likefor-like (LFL) volumes.”

Sainsbury’s recently unveiled its own new strategy, announcing plans to make cost savings of £500million through cuts to store numbers, integrating some Argos stores into larger Sainsbury’s sites and using more technology to make shopping easier.

Tesco has been making its own cuts this year – swinging the axe at staff and stores, with 9,000 job losses revealed in January and a further 4,500 in August.

But Mr Lewis can expect tough questions over how he plans to tackle its rival, along with demands for updates on its Jack’s discount stores after one was turned into a Tesco a year after opening.

The Jack’s brand was supposed to be the company’s first step to taking on discounters Aldi and Lidl, which are both encroaching on their rivals by opening high street convenience stores to tap into the “food for today” market.

Last year’s heatwave and Fifa World Cup affected numbers