Tesco earnings set to throw light on fragile state of British consumer

Tesco UK's report on first-quarter trading this Friday is set to give a valuable indication of the impact of rising prices on shopper behaviour

Tesco shares are down 15% so far this year.

The fragile state of the British consumer will be laid bare later this week when Tesco, the country's biggest retailer, updates on trading amid a worsening cost-of-living crisis.

When Tesco, which has more than a 27% share of Britain's grocery market, reported annual results in April, CEO Ken Murphy said it was too early to make the big calls on changing shopper behaviour as a result of the crisis.

He said it was difficult to untangle the impact of cost pressures coming through for Britons, particularly a first hike in energy bills, from the unwinding of pandemic restrictions, with more people going back to the office.

On Friday, when Tesco reports on first-quarter trading, Mr Murphy is likely to have a clearer view.

With the consumer mood having darkened, and Tesco shares down 15% so far this year, the key question is whether the group will maintain its guidance for the year to end-February 2023 for adjusted operating profit of up to £2.6bn (€3bn), down from £2.65bn in its 2021-2022 financial year.

At this stage in time, the risk to forecasts, we sense, is moderate, but skewed more to the downside than the upside," said Shore Capital analyst Clive Black.

Pessimism weighing on Britain's households has hit unprecedented levels, as wages struggle to keep pace with inflation.

Last week, the average cost of filling up a typical family car in Britain with fuel exceeded £100 for the first time, while official survey data showed that 77% of British adults were worried about the rising cost of living. 

Reuters