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Tesco set to reveal higher sales after pandemic boom

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Henry Saker-Clark, PA City Reporter
·2-min read
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Tesco is expected to post rising sales as its supermarkets stayed open throughout the pandemic.

However, the UK’s biggest grocer is also expected to reveal more muted profits, which are forecast to be broadly in line with last year’s profits in its update for investors on Wednesday April 14.

Analysts have predicted that the supermarket, which is under the new leadership of chief executive Ken Murphy, will reveal an operating profit of around £1.72 billion for the year to February.

However, this will exclude the impact of its decision to hand back £585 million worth of business rates relief back to the Treasury.

The supermarket chain has been one of the sector’s most consistent performers over the past year and hailed “record” Christmas in its previous trading announcement.

It saw sales increase by 6.7% in the three months to November, accelerating to 8.1% in the key weeks around Christmas.

In February, the grocer also increased its market share for the first time in four years according to data from Kantar as it was buoyed by continued strong growth in its online operations.

Shareholders will hope that its Christmas sales momentum continued into the latter part of the fourth quarter.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Tesco put in a very strong performance over the Christmas period, and some analysts expected consumers to pull out all the stops for Easter this year.

“We wonder if Tesco was able to repeat that strength in the run up to the latest round of celebrations.”

Analysts have forecast that it will reveal revenues of £58.4 billion for the year, with Credit Suisse stating that its like-for-like retail sales are expected to “remain strong” as hospitality and non-essential stores remain shut.

Shareholders will be keen to hear from Mr Murphy how the supermarket group expects to retain trade despite the easing of coronavirus restrictions and inevitable reduction of meals eaten at home.

However, the return of hospitality and food-to-go markets could also help spark improvement in its Booker wholesale business which saw sales slide 8.3% over the Christmas period.

Investors will also be keen to hear how the retailer’s robust performance over the past year will be reflected in dividends.

Russ Mould, investment director at AJ Bell, said: “Tesco has slowly rebuilt its payment up from 2016 and 2017 when it offered nothing and in the year to February 2021 the firm paid out 59.04p a share which included a special dividend payment of 50.93p a share following the sale of its business in Thailand and Malaysia.

“That pay out was followed by a share consolidation which kept share prices from tumbling.

“Investors will be hoping to see payouts continue at similar levels next year excluding the special dividend.”