After suffering a drop from 312p in February, the Tesco share price has been trading around 230p in the weeks since.
As Britain’s largest retailer gets set to release its full-year results, will the numbers give the Tesco share price a welcome boost?
Tesco share price steady during lockdown
Tesco has, by and large, had a good period during the pandemic. The supermarket chain has stepped up to keep the country fed at a difficult time, expanding its delivery service to over 1.5m slots per week and installing new Covid-19 safety measures across its stores.
In October, Ken Murphy delivered his first half-year results since taking over from Dave Lewis as chairman. Murphy said that the pandemic had “tested our business in ways we had never imagined”, but that employees had “risen brilliantly to every challenge.” This was reflected in a 10% Christmas bonus for all front-line staff.
Tesco had come under fire for paying a £635m dividend after accepting government help in the aftermath of the initial lockdown, however had since announced the decision to pay back the £585m it received in business rates relief.
The necessity of home deliveries during the lockdown did allow Tesco’s rivals, Ocado, to briefly overtake them in market value in September 2020. This has since been reversed, with Tesco’s market cap sitting at £18bn compared to Ocado’s £15.3bn. Despite that turnaround, the Tesco share price has still suffered a dip in 2021.
Delivery demand rises in Q3
When Tesco reported in Q3, Christmas trading saw like-for-like sales over the period increase by 8.1%, driven by a 14% rise in sales of “Finest” branded products, while over the quarter, like-for-like sales rose 5.7%.
This outperformance was fuelled largely by an 80% rise in online orders over the 19-week period, with 7m orders delivered over the Christmas period, as Tesco continued to take the fight to Aldi with its “Price Match” pledge on a range of everyday products. Investors will be keen to see how the latest quarter has impacted the full-year results, and what that might mean for the Tesco share price.
The performance over the quarter didn’t come without an increase in costs, which rose £85m to £810m.
Tesco Bank and Booker continue to drag
There have been weak spots for Tesco, which have been a drag on the Tesco share price and results. Tesco's Booker operation caters to hospitality, a sector which has been ground zero of the pandemic fallout.
Tesco Bank saw total sales decline 28.5%, no surprise given the challenges being faced by its customers over the pandemic. Losses at the bank are expected to come in between £175m and £200m.
Profit levels set to be maintained
In terms of expectations for full-year profits, management said that these should be at the same level as a year ago, even with the associated extra costs of taking on new staff, as well as implementing various Covid-19 mitigation measures to protect its staff.
This doesn’t include the repayment of the business rates relief that was announced last month. As a reminder, operating profit a year ago was £2.5bn, however after various costs, this came down to a more modest £973m.
Tesco announces its full-year results on Wednesday 14 April at 7am. What will the numbers mean for the Tesco share price?
Find your flow: four principles for trading in the zone
Learn about the four trading principles of preparation, psychology, strategy, and intuition, and gain key trading insights from some of the world's top investors.
Get this free report
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
