Falling sales, but Tesco is beating rivals

TESCO is set to say that the cost-ofliving crisis has sent its first quarter sales down 0.5 per cent at its trading update on Friday, according to analysts at Bernstein.

The broker had initially predicted that Tesco would report a fall in first quarter like-for-like sales of 3 per cent at its UK stores.

However, it upgraded its forecast after positive market research data from Kantar found the supermarket is outperforming its peers.

Shore Capital head of Research Clive Black said that investors will be eager to hear what Tesco chief executive Ken Murphy has to say about the impact inflation has had on its margins, as well as what scope he has for further cost savings and price cuts to protect consumers.

“We’ll also be looking out for any evidence that its customers have been trading down from brands to value ranges, to private labels,” he said. “What Tesco’s sales have gained from inflation it will have lost on volume. That said, the likes of Tesco will look very resilient compared to other retailers because we all have to eat.”

Michael Hewson, chief market analyst at CMC Markets, said a combination of inflation and Tesco’s investment in price cuts to put pressure on discounters Aldi and Lidl is likely to have hit its margins.

He added: “Rising fuel prices are likely to increase the costs of maintaining its delivery and logistics operations.” Elsewhere, WH Smith is tipped to say revenues from its train station and airport stores are rebounding at its third quarter trading update onwednesday.