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Tesco announces interim results

Tesco interim results last week showed positive trading performance and cash generation, despite the economic backdrop.

- Retail LFL sales up +3.2%

- Operating profit down 10% at £1.25bn

- Net debt reduced by £0.5bn to 2.5x EBITDA .

- On track to meet share buyback target of £750m Tesco shares by 2023

- Aldi Price Match, Low Everyday Prices and Clubcard Prices helping ease cost-of-living pressures =>

- Food sales grew by +1.6%

- Online sales at 12.9% of total sales – down 1.6% y-o-y

- The fifth Urban Fulfilment Centre opened automated picking technology within physical stores

- Tesco Whoosh now operating out of 400 stores growing to 800

- Electronic vehicle charging has now reached its 500th store

- Purchased back seven large stores into full ownership.

We believe the UK grocery market remains a defensive non-discretionary sector. Tesco aims to use its market leading position to keep the weekly shop as low as possible. We see them continuing to retain their balance sheet strength and invest in the business for the long term.

We also view the importance of the omnichannel physical store to Tesco confirmed by the rollout of Urban Fulfilment Centres, expansion of Tesco Whoosh, and the continued trend of unwinding sale and leaseback structures to own freehold.

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