Tesco sales expected to fall again in third quarter

City analysts predict a further fall in Tesco sales in the third quarter amid worries over the retailer's turnaround

Tesco sales expected to fall again
Tesco remains the biggest supermarket in the UK, although its market share has fallen from 30.5pc to 29.8pc over the last year Credit: Photo: PA

Tesco is likely to report another drop in UK like-for-likes sales next week, sparking further questions about the progress of its turnaround strategy.

Analysts at Deutsche Bank and Barclays have released new notes forecasting that Tesco's like-for-like sales fell by at least 1.5pc in the third quarter of its financial year.

The notes helped to send Tesco shares down 2pc to 347.60p in afternoon trading, although the company is also trading ex-dividend.

Tesco, Britain's biggest retailer, is scheduled to post a trading update for the last three months next Wednesday.

The company's sales have been affected by fragile consumer confidence and cautious spending by families on groceries since the end of summer.

According to Kantar, the UK's leading supermarkets are also under growing pressure from the discounters Aldi and Lidl, and Waitrose, the upmarket supermarket.

For the first time on record, the "big four" supermarkets - Tesco, Asda, Sainsbury's and Morrisons - are all losing market share in the UK.

James Anstead, analyst at Barclays, said that Tesco is likely to report a 1.8pc drop in like-for-like sales for the third quarter, compared to flat sales in the previous three months.

He said: "It seems unlikely that Tesco’s Q3 trading statement will be the turning point that the market is looking for.

"The Kantar data suggests that much of the slowdown is due to weaker market growth – and the most recent set of data looked much more encouraging for Tesco. However, it faces tougher comps in the upcoming two months from last year’s successful Christmas period."

Analysts at Deutsche Bank have forecast a 1.5pc drop in UK like-for-likes, adding: "While the backdrop in the UK is clearly very tough and we forecast a Q3 lfl sales decline of 1.5pc we expect a relatively reassuring message on UK margins, reflecting a broadly stable market share performance versus the rest of the big four."