Wednesday preview: Tesco expected to swing to full year profit

Tesco is expected to reveal it swung to a full year profit on Wednesday as the supermarket chain’s recovery plan shows progress.

The company is forecast to report pre-tax profit of £541m for the year to 26 February, compared to the previous year’s record loss of £6.38bn.

Revenue is expected to come in at £55.3bn, up from £43.5bn the prior year, while operating profit before exceptional items is forecast to rise to £932m from a loss of £5.7bn.

Barclays has predicted a 0.8% increase in fourth quarter UK like-for-like sales, which would be the first quarterly growth in more than three years.

Chief executive Davis Lewis has been working to revive Tesco since he took over the helm from Phil Clarke in September 2014.

Tesco, like its ‘Big Four’ supermarket peers, has lost market share to smaller discounters which has forced the company to slash prices to keep up with competition.

Last week Kantar Worldpanel revealed that Tesco’s market share fell by 0.3 percentage points to 28.1% and sales fell 0.2% in the 12 weeks to March 27.

The company is also continuing to rebuild its relationship with suppliers after revealing in September 2014 that a shortfall had been found in its accounts. Tesco was accused of bringing forward payments from suppliers to help bolster its financial results as sales fell.

“For us the main focus will be commentary on the direction of profit,” said UBS analyst Andrew Gwynn. “We don't think Tesco will give explicit guidance but it is possible some of the higher estimates in the market are forced to temper optimism.”

Ahead of the group’s results, Tesco announced it has agreed to sell just over half its stake in South East Asia ecommerce marketplace Lazada to China's giant Alibaba Group for $129m. The grocer, which made a £124m ($200m) investment in 2013, will sell an 8.6% stake to Alibaba $129m, which it said it will use for general working capital purposes.

The sale leaves Tesco with an 8.3% holding and values Lazada at roughly $1.5bn.

Tesco is expected to announce further disposals in its annual results.

The group is reportedly planning to sell off some of its side businesses, including Dobbies Garden Centres chain, coffee shop chain Harris & Hoole and restaurant chain Giraffe, in order to focus on its core supermarket business.

Wednesday 13 April

INTERIMS
WH Smith

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Beige Book Fed Survey (US) (19:00)
Business Inventories (US) (15:00)
Crude Oil Inventories (US) (15:30)
Industrial Production (EU) (10:00)
MBA Mortgage Applications (US) (12:00)
Producer Price Index (US) (13:30)
Retail Sales (US) (13:30)

FINALS
Mi-Pay Group, Midatech Pharma , Tesco, Walker Greenbank

DRILLING REPORT
Fresnillo

EGMS
JSC KazMunaiGaz Exploration Production GDR (Reg S)

AGMS
Allianz Technology Trust, Hunting, Maven Income & Growth 3 VCT

TRADING ANNOUNCEMENTS
Atkins (WS), Fresnillo, Halfords Group, Jupiter Fund Management

UK ECONOMIC ANNOUNCEMENTS
BRC Sales Monitor (00:01)

FINAL EX-DIVIDEND DATE
Sagicor Financial Corp.