Photograph: Toby Melville/Reuters
Tesco is expected to reveal its first quarter of underlying sales growth for more than three years when the supermarket reports its full-year results on Wednesday.
Analysts think the country’s biggest retailer is winning back shoppers with better service and lower prices in its stores.
House broker Barclays is predicting a 0.8% increase in sales at established UK stores for the three months to February.
That would be a continuation of the strong Christmas trading period when Tesco revealed a surprise 1.3% rise in underlying sales over six weeks.
Recent data from market analysts at Kantar Worldpanel also indicated Tesco had halved the pace of its sales decline as price cuts helped stem the loss of customers.
A rise in sales would be good news for chief executive Dave Lewis who is under pressure to show results from his turnaround plan, which kicked off in autumn 2014.
Lewis was parachuted in to lead the business following the sacking of Philip Clarke. The business was subsequently engulfed in an accounting scandal after a whistleblower revealed supplier payments were mishandled – a matter that is the subject of an ongoing criminal investigation by the Serious Fraud Office – when Clarke was in charge.
Last year Tesco crashed to the biggest loss ever recorded on the UK high street, slumping £6.4bn into the red after taking massive writedowns on its property portfolio and stock.
James Anstead at Barclays said: “Momentum has returned to the sales line, but headwinds have not disappeared ... The discounters continue to open stores and take market share, ASDA seems to be sharpening its offer and there will likely be cost pressure from the National Living Wage, business rates and rental costs.”
Lewis has warned the City to expect the same level of underlying profits this year as it focuses on staying competitive in a tough grocery market where discounters Aldi and Lidl are still storming ahead. Analysts have pencilled in underlying profits of £932m – a stark contrast with the £4bn it was making four years ago.
As the price war continues, Tesco revealed its latest blow in the price war on Monday. The supermarket said it would accept vouchers from Sainsbury’s Brand Match promotion in order to get money off their shopping until June. The promotion will be short-lived, however, as Sainsbury’s announced last week that it would stop handing out Brand Match vouchers on 26 April
In the autumn Lewis bought the retailer some breathing space by selling off its South Korean chain for £4bn, as well as some of its UK landbank, to cut debt.
Anstead said he did not expect Tesco to reintroduce the dividend in the near future as its balance sheet remained stretched.
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