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Tesco heading for a disappointing year

Tesco is set to report another year of disappointing trading as the supermarket giant struggles to stem declining sales
April 9, 2014

Tesco's (TSCO) full-year results have already been somewhat overshadowed by news that finance director Laurie McIlee is stepping down, amid rumours of clashes with chief executive Philip Clarke over strategy. We're hoping to get an update on that controversial strategy, including customer reaction to the recently announced price cuts and details of a new joint venture with Tata in India, when the supermarket giant reports next week.

IC TIP: Hold at 286p

That's because the future is not looking great at the moment. Tesco has been struggling to stem declining sales across its business and recent figures from KantarWorldpanel suggest the grocer is losing market share in the UK. A trading update in January reported a 3 per cent decline in underlying sales over Christmas, driven mainly by the UK, but also weak trading in Europe and Asia. We expect this trend to have continued into the fourth fiscal quarter.

Management has guided investors to expect full-year trading profit of between £3.15bn and £3.41bn. Analysts at Deutsche Bank are looking for £3.23bn, down 7 per cent on last year, with a 4 per cent slide in the UK and a flat dividend.