Tesco set to reveal £800m profit as Sainsbury’s stumbles
Lewis can celebrate as Coupe sweats over his plan for Asda merger
TESCO’S chief executive Dave Lewis is poised to unveil stellar profits this week – in a striking contrast to his main rival, Mike Coupe of Sainsbury’s, whose plan to merge with Asda has received a major blow.
Tesco is expected to say on Wednesday that its profit in the first half rose 41 per cent to £815 million. Analysts now believe the supermarket, which recently launched a chain called Jack’s to challenge Aldi, could make almost £2 billion by the year end.
Lewis – also known as ‘Drastic’ Dave for his bold strategic moves – has seen shares in his firm rise 15 per cent this year compared with a 2 per cent rise in the FTSE 100. Meanwhile, Sainsbury’s and Asda have been told that the competition authorities have identified 230 locations where stores were too close for comfort, raising the prospect they could be forced to hive off far more stores as part of the merger than expected. Sainsbury’s chief executive Coupe said earlier this month there were ‘extreme scenarios’ where the remedies demanded might make it difficult to complete the deal.
Analysts at Bernstein said Coupe would walk away if the number of stores he was forced to cut was more than 200.
Another City source said the Sainsbury’s chief would be ‘toast’ if the deal failed. ‘This [merger] might well get cleared by the competition authorities but with a lot of conditions that may not be palatable for anyone.
‘If that is the case, it could mean the merger doesn’t happen and that then begins to look like a massive miscalculation,’ the source added.
Retail analyst Nick Bubb described the Competition and Markets Authority statement on Thursday as ‘hard-line’. But he said most investors had so far not been spooked, with the share price largely unchanged.