Broker snap: No surprises at Tesco

16th Jun 2009 12:56

Broker Charles Stanley expects the market to leave its profit forecasts for Tesco broadly unchanged after the supermarket chain delivered an in-line trading update on Tuesday morning.Although like-for-like sales growth in the UK heartland picked up, rising to 4.3% in the company's first quarter from 3.7% in the previous quarter, it still lags behind sector peers such as Wm. Morrison and J. Sainsbury. Charles Stanley expects this state of play to continue, as Tesco has been 'more aggressive than peers' in competing on price and this 'is having a deflationary impact on sales.'Tesco's greater reliance on non-food sales will also act as a drag, but Charles Stanley believes the group's long term earnings growth prospects remain the best in the sector, 'given significant growth potential in Retail Serices (Tesco Personal Finance, telecoms, etc.) and International.'The broker advises clients to accumulate the shares.