Big 4 grocer Tesco is expected to report higher sales over the first half of the year when it announces its results this Wednesday, despite growing pressures on consumer budgets.
The supermarket giant is among the retailers facing huge pressure from customers making the switch to discounters Lidl and Aldi as they look to cut down on the cost of their weekly shop.
So far this year, Tesco – which will update the market on its current trading later this week – has been the “most resilient” of the UK’s leading supermarkets. However, shareholders will be keen to find out how demand is faring as the cost-of-living crisis intensifies.
As a result, analysts are expecting Tesco to post sales of £31.2 billion for the six-month period, compared with £30.4 billion a year ago, according to experts at AJ Bell.
Earlier this year, Tesco revealed it saw total sales jump 2% to £13.6 billion over the quarter to March.
Tesco said investment to keep prices low, including its Aldi Price Match programme, has helped it win market share from its biggest rivals.
According to Kantar, Tesco sales increased by around 1.9% over the 12 weeks to 5 September.
However, it lagged some way behind the growth seen by Aldi and Lidl, which saw increases of 18.7% and 20.9% respectively for the period.
The increase in demand from customers seeking cheaper alternatives in response to higher household bills helped Aldi overtake Morrisons to become the UK’s fourth largest supermarket for the first time.
Investors will also be keen for an update on the Tesco’s ‘save to invest’ scheme, which has been designed to save roughly £1 billion over the next three years, with the market eager to see how resilient Tesco’s finances will be in the long term as pressure from ongoing cost rises continues to weigh on the company.
“Sales at Tesco’s supermarkets have showed resilience, particularly in Europe, but as consumers start trading down to cheaper alternatives, we’d like to see what impact this has had on sales at the half-year mark,” Hargreaves Lansdown equity research assistant Charlie Williams said.
“Management continues to expect full-year underlying operating profit in the realm of £2.5 billion to £2.8 billion, but this assumes a return-to-normal consumer behaviour.”
