Marks & Tesco: Sales strong or weak, future looks bleak

Marks & Tesco: Sales strong or weak, future looks bleak

Henry Croft, Research Analyst at Accendo Markets, commented this morning:

On a grim day for UK grocers, shares in the UK’s #1 supermarket Tesco are down this morning, towards the bottom of the pile on a notable Christmas sales miss. CEO Dave Lewis’ strategy implementation is yielding results – 2017 saw strongest Christmas sales since former head Leahy’s departure in 2010 – however the negative reaction stems from UK like-for-like sales during the key period coming in at 1.9%, well shy of 2.8% consensus, weaker than even the lowest estimate of 2.0%. Echoing sentiment from peer Sainsbury’s yesterday, Tesco announced weak general merchandise sales, with strength in food unable to lift wider UK sales figures to meet estimates.

On the other side of the high street, it was a similar story for Marks & Spencer, this morning’s worst performing FTSE 100 stock. Reporting a continued deterioration of conditions, the company noted both falling food and clothing sales over the crucial Christmas weeks, extending a trend that has been dogging the company for many quarters, despite both segments weakened by less than expected. Yet even if they did meet estimates, the clothing sales decline doubled on the previous quarter. And although some shareholders will be put at ease by a reiteration of FY guidance, it seems unlikely to reduce concerns that the M&S turnaround is failing to see the success of the aforementioned Tesco, while also raising further questions about how much pressure the UK high street can handle from the rise of online retailers.

The timing of these companies’ announcements couldn’t come at a more telling time, coming against the backdrop of a stellar period for German discounters, as per Kantar data earlier in the week, and outstanding performances from fashion retailers. Just today, fashion retailers announce sales revenues 10-25% higher over the Christmas period, as companies both young (Boohoo) and old (Ted Baker) see bumper demand, further projecting the image of the cash conscious UK consumer wanting bang for their buck, especially at yuletide. The ballad of British grocers goes on, but for how much longer?

M&S shares -4.5%; Tesco shares -3.2%. Accendo Markets does not have a rating or target price on Marks & Spencer or Tesco

Enter your e-mail address to receive updates straight to your inbox

My Newsletter

You can easily unsubscribe at any time by clicking on the unsubscribe links at the bottom of each of our emails

About Author

Accendo Markets

Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including ‘2018 Winner of Best CFD provider’ at City of London Wealth Management awards and 2017 & 2018 Best CFD Research Service in ADVFN’s International Financial Awards Accendo Markets Ltd. is authorised and regulated by the Financial Conduct Authority (FCA). For more information, visit www.accendomarkets.com