Higher prices set to dominate Tesco’s first-quarter earnings update

Bargain-hunting and promotions means margins could be lower

Supermarket giant Tesco (TSCO) is due to report its results for the period from March to May on 16 June, with analysts expecting higher prices to be the main driver of sales while volumes and average basket sizes are likely to have fallen.

This is against a first quarter of 2022 which saw tough comparisons with trading over lockdown the previous year, meaning UK and Irish sales were down 1.5% and 2.4% on a like-for-like basis and growth at the group level was entirely due to a standout performance by the Booker wholesale business.

According to data from retail consultants Kantar, Tesco has given up around 0.3% of market share to the discounters over the past year but still accounts for around 27% of supermarket spending as its Clubcard and Aldi Price Match offers continue to attract shoppers.

The King’s coronation, combined with several bank holidays and generally good weather, is likely to have boosted food and drink demand in May this year.

However, with grocery prices 17% higher than they were a year ago, more shoppers are trading down to find savings which means Tesco’s profits could be squeezed by a higher proportion of lower-margin sales.

Finally, analysts and investors will no doubt want to hear chief executive Ken Murphy’s thoughts regarding potential government intervention in supermarket pricing. [IC]

FedEx results to provide a global economic health check

Logistics and delivery firm is a genuine bellwether

It won’t just be FedEx (FDX:NYSE) shareholders who will be watching the latest missive from the company closely.

The business is often seen as a decent indicator of the health of the wider economy. It has broad exposure across areas like transportation, logistics and e-commerce. These may show some early signs of the recession which many people are now expecting in the US and, given FedEx is a global business, how the rest of the world is faring right now too.

The company reports its fourth quarter and annual results on 20 June. Its previous quarterly update on 16 March was widely welcomed by investors as it boosted full-year earnings per share guidance to between $14.60 to $15.20.

However, this was not a function of growth, with volumes dropping, but cost-cutting on the company’s part. FedEx has a plan to ultimately remove $3.7 billion of cost from the business.

Portents for Q4 earnings are not too great. Research by investment bank Morgan Stanley suggests domestic aircraft utilisation at its FedEx Express freight business fell 10% sequentially in April and was down 17% year-on-year. In Morgan Stanley’s view this means FedEx moved a significantly smaller number of parcels than had previously
been assumed. [TS]

UK UPDATES OVER THE NEXT 7 DAYS

FULL-YEAR RESULTS

June 16: Record, Peel Hunt

June 19: NextEnergy Solar Fund, Triple Point Energy Transition

June 20: Enteq Technologies, IG Design

June 21: Berkeley Group Holdings, Ra International Group, Liontrust Asset Management

June 22: Cordiant Digital Infrastructure, Urban Logistics Reit, First Property Group, Alpha Financial Markets Consulting, XPS Pensions, Mulberry

TRADING ANNOUNCEMENTS

June 16: Tesco

June 20: SThree

US UPDATES OVER THE NEXT 7 DAYS

QUARTERLY RESULTS

June 19: Agile

June 20: FedEx, Korn Ferry, La-Z-Boy

June 21: Concentrix, KB Home, H B Fuller, Worthington Industries, Winnebago Industries

June 22: Accenture, Kroger, Darden Restaurants, FactSet Research, Blackberry

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