A resilient performance from Tesco

Tesco (TSCO) stuck with its full-year profit guidance, although at the lower end of the range, as it battles a challenging environment for consumer spending. The immediate market reaction to these results was a nervy one, with the shares down by a couple of percentage points after the retailer said that it now expects a full-year retail adjusted operating profit of £2.4bn to £2.5bn (a haircut from the £2.4bn to £2.6bn previously trailed) and revealed a fall in half-year statutory profits on the back of lower retail volumes, moves to keep prices competitive, and a chunky £626mn impairment charge on non-current assets due to higher discount rates. But given that the full-year retail free cash flow forecast was bumped up to an attractive £1.8bn and there was a strong market share performance, Tesco remains a solid sector option.