Jefferies expects Tesco’s (LON:TSCO) results to be on track, the analysts have said. The comments come as Britain’s biggest supermarket prepares to update the market on its interim performance on Wednesday, October 4.
Tesco’s share price lost ground in the previous session, shedding 1.15 percent to close at 185.05p, underperforming the broader UK market, with the benchmark FTSE 100 index ending the session 0.13 percent higher at 7,322.82 points. The group’s shares have added just under two percent to their value over the past year, but are down by some 10 percent in the year-to-date.
Jefferies reiterated its ‘hold’ rating on Tesco yesterday, while lifting its price target on the shares from 180p to 185p ahead of the blue-chip grocer’s interims on Wednesday.
“We expect upbeat interims from Tesco, with improved cash generation, good second quarter UK like-for-like delivery and a reiteration of the 3.5-percent to four-percent margin ambition all likely features,” the broker’s analyst James Grzinic pointed out, as quoted by Citywire. “Less helpfully, we anticipate contained first-half UK margin gains in the context of the longer-term group target. This and a likely slowing UK momentum to come, could cap the catch-up trade.”
Grzinic further pointed out that the UK grocer needed to build its margin and “investors may be willing to buy into the major build required in future margins to deliver against the more upbeat end of market expectations”.
Tesco’s results will follow the latest Kantar data which showed that grocery sales at UK’s biggest supermarket had grown by 2.7 percent in the 2 weeks to September 10. The FTSE 100 group’s market share, however, remained under pressure, squeezed by 0.3 percentage points to 27.8 percent during the reported period.