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Tesco to reveal third quarter of rising sales

Published 02/10/2016

Tesco is expected to reveal another quarter of rising sales
Tesco is expected to reveal another quarter of rising sales

Tesco is set to reveal its third consecutive quarter of rising sales this week as the supermarket continues its fight-back amid a fierce price war.

Half-year results on Wednesday are expected to show the market leader's recovery gathering pace, with a pick-up in sales growth and higher profits.

Recent industry figures suggest Tesco had notched up its best performance since March 2014 after the Big Four players were boosted by sales of sparkly as Britons toasted Team GB's Olympic and Paralympic sporting success.

Kantar Worldpanel said Tesco's popular "summer drinks" promotion tapped into the nation's celebratory mood, although the chain continued to lose market share, falling from 28.2% to 28.1% in the 12 weeks to September 11.

Half-year results come after Tesco saw two quarters in a row of sales growth for the first time in more than five years, with a 0.3% rise in like-for-like sales over the first quarter, after a 0.9% uptick in the previous three months.

Analysts at Jefferies expect sales growth of around 0.5% in the second quarter, while Macquarie experts are pencilling in a 0.6% increase.

It will also see a return to interim earnings growth, with UK trading profits almost doubling to £316 million from £166 million a year earlier, according to Macquarie.

Its trading performance is likely to put rival Sainsbury's in the shade after the UK's second biggest chain posted its second consecutive quarterly fall in sales.

Sainsbury's, which recently completed a £1.4 billion takeover of Argos, reported a 1.1% drop in like-for-like sales excluding fuel for the second quarter.

But Tesco has already cautioned that its investment in price cuts and its new Farm Brands range would slow bottom line profit improvement, ''particularly in the first half''.

Analysts are also expecting a major increase in Tesco's pension deficit following the Brexit vote.

Macquarie experts said despite Tesco's fears over the hit from lowering prices, they expect "clear evidence of a UK margin recovery gaining pace".

The results come amid a high-profile court case involving three former Tesco executives.

Carl Rogberg, 49, Chris Bush, 50, and John Scouler, 48, denied charges in relation to the £326 million accounting scandal at the supermarket when they appeared at Westminster Magistrates' Court last month.

They have been charged with fraud by abuse of position and false accounting.

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