Tesco (TSCO) will release its interim results on Wednesday 7 October. The figures, which will cover its half year to the end of August, will arrive as supermarket shelves begin to look a little barren, with customers being warned not to repeat their stockpiling antics from earlier this year.
While retail footfall is beginning to come under renewed pressure, supermarket sales have remained strong after six months of the pandemic. Grocery inflation remains relatively high at 2.3 per cent for the 12 weeks to 6 September, according to Kantar. This is well above the general inflation rate, as per the latest consumer price index, which stood at 0.5 per cent in August.
Tesco has spent the last six months boosting its capacity and retro-fitting its stores and supply chain to handle the crisis. Over its first quarter, it managed to increase its number of weekly online delivery slots from 600,000 to 1.3m, as online sales have taken a much bigger share of its overall activity - the group expects around £2bn of online sales growth this year. First quarter sales, in its 13 weeks to 30 May, rose by 9.2 per cent to £12.2bn. This wasn’t enough to placate the majority of Tesco shareholders, who cast an advisory vote against its directors’ pay report at its June AGM, however.
We await more detail on how Tesco has managed to balance roaring sales with mounting Covid-19 costs to ensure the protection of its margins. The group should be better-prepared for panic-buying this time round, but inventory pressures are inevitable. A demonstration of Tesco’s working capital management would be welcome.
New chief executive officer Ken Murphy will also be expected to provide an update on Tesco Bank, an albatross that was last expected to record an operating loss of up to £200m this year. An increase in provisions for bad debt is likely as furlough support comes to an end next month, with a darkening economic picture expected to land a blow on Tesco’s loan book.
We also hope for reassurance that the £5bn special dividend, which was promised following the decision to sell its Asian business earlier this year, will be delivered.
