Turnaround plan could see Tesco sales back in growth

  • @Thompj

Tesco could unveil its first rise in UK underlying sales for nearly two years next week, giving the clearest indication yet that its £1bn recovery plan is working.

However, the world's third-largest retailer is expected to again disappoint investors on 3 October by revealing more heavy losses at its US operation, Fresh & Easy, over the first half.

The UK market leader, Tesco is forecast to deliver a 0.1 per cent rise in like-for-like sales in its second quarter to 25 August, according to Deutsche Bank, one of the grocer's three house brokers. This would mark a substantial improvement on the 1.5 per cent decline in the previous 13 weeks and would also be the first time it has posted growth in UK underlying revenues since the third quarter of 2010-11.

However, other analysts, such as fellow house broker Nomura, forecast a flat UK performance.

Nevertheless, even a slight turnaround in the supermarket giant's trading in the UK – which still accounts for more than 60 per cent of Tesco's sales and profits – would help to ease the pressure on its chief executive, Philip Clarke.

It would also go some way to vindicating the £1bn investment he unveiled in April to turn around its faltering domestic business, including adding 8,000 full-time equivalent staff and introducing 1,800 new products.

Overall, Tesco is expected to post a 9 per cent fall in group trading profits to £1.61bn over the half year, according to Deutsche Bank. Fresh & Easy, which has 199 stores in the US, is expected to post a loss of £70m for the half.