CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Tesco and Sainsbury’s shares set to rise as UK grocery sales surge

British supermarkets could see shares continue to rise in October after UK grocery sales growth surged in September as consumers prepared for tighter Covid-19 restrictions, according to industry data.

  • Tesco and Sainsbury’s shares likely to rise amid increase in sales due to tougher Covid-19 rules
  • British shoppers avoid stockpiling, alleviating pressure on UK supermarkets and supply chains
  • Shares in Tesco and Sainsbury’s rebound 5% in October so far

Tesco and Sainsbury's could see their share prices continue to rise throughout October as British shoppers buy up groceries to bunker down this winter amid tighter coronavirus restrictions throughout the UK aimed at curbing the spread of the virus.

Sales increased by 10.6% year-on-year in the four weeks to 4 October as people look to consumer more food and drink at home due to the UK government imposing a new three-tier Covid-19 lockdown system on Monday, according to research by retail consultancy firm Kantar.

Thankfully, for UK supermarkets, research showed ‘limited evidence’ of shoppers stockpiling goods, which caused major supply chain issues during the first wave of infections in mid-March.

Kantar noted that alcohol sales were likely to generate £261 million more for British supermarkets in October than in the same month last year due to pubs, bars and restaurants all subject to a 10pm curfew.

Tesco and Sainsbury’s shares have climbed more than 5% in October, with the pair trading at 222p and 201p, respectively at the time of publication. Both supermarket chains are down 13% year-to-date.

Grocery sales bounce back after Help Out to Eat Out scheme ends

Approximately £155 million was wiped off UK grocery sales in August due to people taking advantage of the government’s Eat Out to Help Out scheme aimed at supporting restaurants amid the coronavirus pandemic, according to earlier research carried out by Kantar.

‘Diners' confidence built throughout the month, and footfall increased during each week of the scheme, culminating in the final bank holiday Monday, when dining out accounted for a two and half time's greater share of consumer spend that the pre-Covid average,’ Fraser McKevitt, head of retail and consumer research at Kantar, said

‘Fewer meals eaten at home meant consumers spent £155m less in supermarkets in the four weeks to 6 September compared with July,’ he added.

Tesco raises dividend despite fall in H1 profit

Despite reporting a drop in profit due to Covid-19 related costs and a loss in its banking unit offsetting rising grocery sales, Tesco’s management opted to increase the dividend, pleasing investors in the process.

‘Throughout the Covid-19 crisis, we have been guided by four key priorities: providing food for all, safety for everyone, supporting our colleagues and supporting our communities, Tesco said in half year (H1) results, published earlier this month.

‘As a result, our 440,000 colleagues have been able to make a significant and lasting contribution towards keeping their nations fed,’ the company added. ‘At the same time, we have invested in value for customers and continued to make strategic progress as the business moves beyond the turnaround.’

Group sales rose 6.6% to £26.7 billion, while operating profit fell 4.5% to £1 billion. Tesco, however, raised its interim dividend by 20% from 2.65p per share to 3.20p.

Sainsbury’s will unveil their own H1 earnings on 5 November.

How to trade stocks with IG

Looking to trade Tesco, Sainsbury’s and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Tesco PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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