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Tesco set to report slower sales growth

TESCO, Britain&rsquo;s biggest retailer, is set to report slower underlying UK sales growth than rival J Sainsbury for the fifth quarter in a row this week, alongside a small rise in first-half profit.<br /><br />But analysts expect Tesco to flag a stronger second-half profit performance, and some see signs it is beginning to close the gap on faster-growing competitors like Asda and Wm Morrison, as well as Sainsbury&rsquo;s.<br /><br />Tesco, which runs around 4,300 stores in 14 countries, is more exposed to discretionary non-food items, which have suffered more than groceries in the recession.<br /><br />Some of the underperformance has been self-inflicted as well. Tesco launched a cheaper range of discount brands in September last year, which helped to stem the flow of customers to hard-discounters like Aldi and Lidl in the recession, but also depressed the amount of money it takes at the till.<br /><br />As the launch of the discount brands passes its anniversary, analysts expect Tesco&rsquo;s relative performance to improve. <br /><br />Analysts expect Tesco to report a 3.4 per cent rise in sales at British stores open at least a year, excluding fuel and VAT sales tax, for its second quarter ending 29 August, according to a Reuters poll.<br /><br />That would be down from 4.3 per cent in the first quarter, due in part to a tougher comparative number last year and to falling food price inflation.<br />Sainsbury&rsquo;s, Britain&rsquo;s third-biggest grocer, is expected to report a 5.6 per cent rise in sales on the same basis for the 16 weeks to 3 October, down from 7.8 per cent in the first quarter for the same reasons.<br /><br />Tesco&rsquo;s total global sales for the six months to 29 August are tipped to climb 10 per cent to &pound;28.1bn with an acquisition in South Korea last year offsetting weakness Europe.