Tesco set to trade higher ahead of Q1 results as online sales surge

Tesco is expected to see its share price climb higher ahead of its first quarter (Q1) results on Friday 26 June, with the grocer bolstered by the sale of its Polish business and a surge in online sales amid the Covid-19 pandemic.

The 12 analysts offering 12-month price targets for Tesco have a median of 275p per share with a high estimate of 310p and a low of 220p. Based on the stock trading at 227p per share at the time of publication the median target implies a potential upside of 21%, while the high and low estimate suggests the Tesco could climb as much as 36.5% or decline by 3%.

Tesco agrees sale of Polish business

Earlier this month, the British supermarket chain announced that it has agreed to sell its Polish business in a deal worth around £165 million.

The decision to sell the unit comes after the business recorded a pre-tax loss of £107 million at the end of its previous financial year, with the sale expected to be finalised later in 2020.

‘We have seen significant progress in our business in central Europe, but continue to see market challenges in Poland,’ Tesco CEO Dave Lewis said in a statement. ‘The group will now focus its central European efforts on the remaining businesses in the Czech Republic, Hungary and Slovakia.’

News of the sale had little impact on the Tesco’s share price, but investor will be eager to see how the company plans to deploy the capital raised from the sale to drive growth in other areas of the business.

Tesco sees online grocery sales surge during lockdown

According to a recent report by Kantar, online grocery sales surged in the 12 weeks to 14 June, with the coronavirus pandemic accelerating a shift in shopping habits.

British supermarkets saw take-home sales increase by 13.7% year-on-year over the 12 week period, with revenue growth soaring 18.9% over the last four weeks.

‘Consumers are also contemplating their domestic budgets,’ Fraser McKevitt, head of retail and consumer insight at Kantar said.

‘Two thirds of shoppers are very concerned about the economic outlook for the rest of 2020, and efforts to tighten purse strings can already be seen in a preference among furloughed workers for budget, own-label lines and a move away from more premium products.’

Tesco had the highest market share of the multiples during the 12 weeks to 14 June, at 26.9%, compared to 27.3% a year earlier. Sainsbury's had a market share of 14.9%, Asda 13.9% and Morrisons 10.1%. Meanwhile, Aldi's market share was 7.5%, Waitrose was 4.8% and Iceland was 2.5%.

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