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Tesco interim earnings: what to expect

Tesco Plc (TSCO) is scheduled to release its interim earnings on Wednesday 6 October. The results will cover the 26 weeks to 28 August 2021.

How is Tesco placed?

The supermarket group is the UK’s largest with a 27% market share. Its closest rival is Sainsbury's with 15%, so it can clearly be seen that the company is way out ahead, however this advantage is under threat from the new incumbents such as Aldi and Lidl.

Then there are the online offerings of which Amazon is stealing market share for business to our door steps. It is now more concerned with the UK having shed its Thai and Malaysian units. Amazon has been paying down debt and is no longer being pressured to make any further big payments into its pension fund. This means that Tesco could be in a good position to return money to shareholders.

Where are the headwinds?

With all retail, competition in its rawest form comes from pricing. Driving down prices hits margins and when margins are driven down shareholders feel the pinch. Because of its size Tesco does have pricing power, but this has been tested recently with disruption in supply chains. This is beyond Tesco’s control, to a degree, but nonetheless it will be something that the board will have to address in its report.

Another area is the increasing costs of securing its own heavy goods vehicle (HGV) drivers. Bringing in cheap labour from abroad is one solution, however, this is proving difficult and so Tesco has had to increase its wages in this area to attract drivers.

Covid-19 is another unknown, however, some believe that this is now more under control, although remains a point of potential disruption.

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