Newspaper article Manchester Evening News

Markets Round-Up

Newspaper article Manchester Evening News

Markets Round-Up

Article excerpt

SUPERMARKET rivals Tesco and Sainsbury's will go head-tohead in the City this week, having experienced contrasting fortunes in recent months.

The battle to turnaround Tesco's UK performance will be back in the spotlight on Wednesday when the supermarket behemoth reports a slide in half-year profits.

Tesco is forecast by brokers Shore Capital to report pre-tax profits of Pounds 1.5bn for the six months to August 25, a drop of 12 per cent on the same period last year.

The UK's biggest retailer issued its first profit warning in 20 years in January and most recently reported a 1.5 per cent fall in underlying sales in the 13 weeks to May 26 - although this did not include the period around the Queen's Diamond Jubilee.

Despite its latest quarterly sales decline, Tesco said its Pounds 1bn turnaround, which has seen it revamp 100 stores and recruit 4,300 extra staff, is beginning to gain traction as it competes more convincingly with rivals.

Shares have recovered since June but are still 15 per cent lower than they were at the start of the year after plunging in the wake of the profits warning.

Shore Capital analyst Clive Black underlined the importance of turning around the UK business.

He said: "If Tesco does not stabilise the performance of the core chain and position the business for future growth, albeit at a more sedate pace than historical underlying growth rates, then what it delivers internationally and in retail services will be of secondary interest and we will struggle to recommend the stock positively."

Group chief executive Philip Clarke has assumed leadership of the UK arm and pulled in marketing and food experts from Tesco's global businesses to oversee the turnaround.

The group has been testing initiatives in a handful of stores across the UK such as reducing space set aside for non-food, boosting the space dedicated for food, ditching the Tesco Value label and bringing in nearly 2,000 new products.

The group also plans to expand its online grocer capacity with more so-called 'dark stores' - effectively stores without customers that fulfil grocery orders placed online.

Tesco is likely to come under further pressure over its troubled US chain - Fresh & Easy - as it continues to report losses and moves to cut costs. …

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