Tesco share price: 5 things to watch out for in its full-year results

The British supermarket chain has boosted its sales growth in recent months, which has been reflected in its share price with the stock making gains from 2018 lows.

Tesco will announce its full-year 2019 results on April 10, with investors expecting a strong end to financial year that has seen the supermarket chain boost its sales and its share price recover from 2018 lows.

Over the last 12 months of trading, the company has become much leaner after years of international expansion left it overstretched, leading to its share price falling by more than 50%. However, a lot has changed since then and Tesco is looking to reveal the extent of its progress in its annual results on Wednesday next week.

Here are 5 things to look out for ahead of Tesco's full-year results on April 10:

Tesco earnings growth

Tesco is expected to report earnings per share (EPS) of 14.1p in its upcoming annual results, up 18.6% compared to last year. Meanwhile, net income is forecast to come in 56.2% higher at £1.34 billion and revenues are expected to rise by as much as 11.6% to £64.18 billion.

Tesco’s EPS has grown by around 20% over the last few years, with the company unlikely to be able to maintain that pace moving forward. However, after the supermarket recording its highest sales figures over the FY 2018 Christmas period since 2009, the business has weathered what has been a challenging few years.

Margins recover after successful cost-cutting measures

Tesco has made a strong push to improve margins, with the supermarket setting a target of 3.5% -4% by 2020. Investors will eager to see if the company remains on track to reach its goal, with the business expecting to see margins rise to 3.2%, a sign it is on pace.

Its margins recovery has been relatively successful, driven by a cost-cutting measures over the last few years that have helped make the business leaner and helped strengthen its position in the UK market.

Synergies realised from the Booker merger

Tesco completed its £4 billion takeover of Booker, the UK’s largest wholesaler, back in March 2018, with synergies from the deal now being delivered.

‘We think Booker can deliver multi-year profitable growth,’ UBS analyst Daniel Ekstein told Insider. ‘The deal plays to Tesco's strengths, addresses Booker's challenges and the customer wins.’

‘Booker's terms of trade improve as prices are aligned with market leader Tesco, allowing it to sell more competitively. Tesco's expertise in fresh and private label credentials, plus its delivery fleet, transforms Booker's capability to deliver meal solutions,’ he added.

Competition heats up

Tesco remains the UK’s largest supermarket, but faces stiff competition from Asda, which overtook Sainsbury’s, according to Kantar data.

The trend of more affluent households visiting Asda is one that Tesco will need to keep an eye on, since it needs to retain its competitive price offering in order to avoid losing ground to Asda, let alone the German discounters.

Aldi and Lidl once again saw healthy growth in the year to 24 March, with 13 million households visiting Aldi at least once a week.

There seems to be no stopping the German discounters, which will mean continual evolution for Tesco and indeed the rest of the big four as well.

Strong future ahead for Tesco

Tesco has worked hard to improve its business after its share price fell more than 50% several years ago due to a combination of market overreach and an aggressive international expansion push.

In the years that followed, the company has taken steps to improve its earnings growth and trimmed the fat to make it a much leaner business capable of keeping its many rivals at bay. However, there is still a lot more work to be done and investors are interested to see how Tesco plans to navigate the many challenges it faces in the years ahead.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement on 24 October 2019.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.