Planet Retail sees this morning’s numbers as evidence of stabilisation at Tesco’s UK business as the chain firmly cements its position as one of the better-performing among the Big Four. But trouble in international persists with Asia still suffering slow sales, though improving. Despite recent pledges of support for international by management, further long-term disposals in CEE or Asia (barring Thailand) could still be in the offing as Tesco works to rebuild its balance sheet.
On Tesco’s Q2 results, David Gray, Retail Analyst at Planet Retail, commented: “As expected, the numbers this morning indicate further signs of stabilisation at Tesco’s domestic unit, with like-for-like declines narrowing on those reported at Q1. There were also encouraging signs on volumes at Tesco, indicating this is a volume-led recovery.
“These figures have firmly cemented the split in the UK mid-market into two camps – Tesco/Sainsbury’s showing signs of recovery and Asda/Morrisons being the laggards. Considering Tesco was in the throes of the accounting scandal just 12 months ago, being in the former camp is an achievement in itself.
“Despite positive numbers in CEE, problems are persisting in Asia where like-for-likes remained flat in Q2 – an improvement, yes, but not stellar growth. Although Tesco’s Chairman has recently reaffirmed its commitment to the geographies in which it now trades, long-term disposals could still be on the cards considering the relative weakness in the company’s balance sheet and the lack of a dunnhumby sale.
“With Korea already culled, Malaysia is the obvious next market at risk with limited growth potential. However, it is profitable and well-established and so could command a decent price. In CEE, markets like Poland would generate the largest windfall considering its size relative to neighbouring markets and the presence of a string of international operators that could be would-be buyers. Most of these aforementioned markets look safe – for now at least.”