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Tesco share price subdued ahead of Q1 update

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Tesco’s share price (LON:TSCO) has fallen marginally into negative territory in London in today’s session, ahead of the blue-chip grocer’s first-quarter update due out tomorrow. The latest update will come after the most recent Kantar Worldpanel data pointed to flat sales at Britain’s biggest grocer in the 12 weeks to May 19.

As of 14:33 BST, Tesco’s share price had given up 0.33 percent to 226.74p. The group’s shares, however, are outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.56 percent in the red at 7,356.75 points.

Tesco results preview

Tesco is scheduled to update investors on its first-quarter performance tomorrow and Proactive Investors reports that UBS expects Britain’s biggest grocer to report a 0.7-percent increase in UK like-for-like sales, with 4.5-percent growth for wholesaler Booker. The broker, however, expects the company’s like-for-like sales in central Europe to have fallen 1.5 percent and like-for-like sales in Asia to have dropped by 0.5 percent.

The results come ahead of an upcoming capital markets day on June 18 when Tesco is due to present its current strategy and UBS sees opportunities, particularly in the UK and Asia.

In the UK, they believe that the combination of Tesco and Booker has an ‘extensive competitive moat’ in the higher-margin foodservice channel, while in Asia UBS reckons that the grocer’s  capabilities in developing own brand products and its meaningful scale in the Thai market present upside to mid-term margins.

Analyst ratings update

HSBC, which rates Britain’s biggest grocer as a ‘buy,’ boosted its target on the Tesco share price from 265p to 275p, while earlier this week, Shore Capital reaffirmed the company as a ‘buy,’ without specifying a valuation on the shares. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average price target of 279.90p.

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