Profits plunge but Tesco is turning the corner
TESCO is set to report flat like-for-like sales for the second quarter this week, a sign that it is turning a corner, despite its plunging profits.
The supermarket giant shocked the City in January when it issued a profit warning, prompting chief executive Philip Clarke to unveil a £1 billion store and price investment plan to reverse poor trading.
James Grzinic, retail analyst at Jefferies, said: “Major vouchering activity has helped but we expect Tesco to flag that in-store improvements are delivering a much enhanced customer experience, setting the business up well for the balance of the year.”
The investment has taken a heavy toll on profits, the retailer is expected to confirm.
Despite the underlying improvement in like-for-like sales, Tesco will reveal a dramatic decline in UK profit for the first half, down 12 per cent to £1.1 billion.
Globally, Tesco is poised to reveal its worst profit decline since 1994, to £1.6 billion.
Major vouchering activity has helped but we expect Tesco to flag that in-store improvements are delivering a much enhanced customer experience, setting the business up well for the balance of the year
Rival Sainsbury’s also reports on second-quarter trading this week. The giant retailer is expected to say that its sponsorship of the London 2012 Paralympics helped give it a boost, with like-for-like sales forecast to be up 1.5 per cent.