Release Date: April 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tesco PLC (TSCDF, Financial) reported a strong financial performance with sales up 4% year on year and adjusted operating profit up 11%.
- The company achieved its highest UK customer net promoter score in at least five years, indicating improved customer satisfaction.
- Tesco PLC (TSCDF) has recorded consistent market share gains, reaching around 28% in the UK, the highest in almost a decade.
- The company has returned GBP1.9 billion to shareholders through dividends and buybacks, demonstrating strong shareholder returns.
- Tesco PLC (TSCDF) has made significant investments in value, quality, and service, which have strengthened its customer offer and brand perception.
Negative Points
- Consumer sentiment remains fragile due to economic uncertainty, which could impact future sales.
- The competitive environment in the UK food retail sector is intense, requiring continuous investment to maintain market position.
- Despite strong financial performance, Tesco PLC (TSCDF) anticipates a lower level of profit year on year due to increased investment.
- The company faces inflationary headwinds, including tax and regulation, which could pressure margins.
- Tesco PLC (TSCDF) has provided a wider than usual range of profit guidance, indicating uncertainty in market conditions.
Q & A Highlights
Q: Can you provide insights into Tesco's pricing strategy for the year and how it plans to handle promotional activities?
A: Ken Murphy, CEO, explained that Tesco is focused on maintaining a balance between everyday low pricing and promotional offers through Clubcard prices. The company aims to provide reliable pricing on essential items while offering exciting promotions on brands. Tesco's sophisticated pricing systems help focus on prices that matter most to customers. Promotional activity is at a four-year high, but Tesco is confident in its ability to attract supplier funding due to its strong market position and execution standards.
Q: Is there an irrational price war in the UK market currently?
A: Ken Murphy stated that while there is an intensification in competitive positioning, it is not an irrational price war. Tesco maintains a balanced approach, focusing on customer satisfaction, colleague investment, supplier relationships, and investor returns. The company is prepared to respond flexibly to market conditions to maintain its competitive edge.
Q: How does Tesco plan to address the competitive threat from Asda, and what is the company's strategy for maintaining market share?
A: Ken Murphy emphasized the importance of flexibility and firepower to respond to market conditions. Tesco has built momentum with customers and aims to maintain it by focusing on value, quality, and the shopping experience. The company is determined to protect its market share and continue winning with customers.
Q: What is Tesco's outlook on industry price pressures and their potential peak?
A: Ken Murphy noted that predicting the peak of industry price pressures is challenging due to various factors like new tax legislation, national living wage increases, and competitive dynamics. While summer might be an estimate for price pressures to peak, Tesco remains focused on maintaining competitiveness and value for customers.
Q: How does Tesco view its online business and the role of Marketplace in its growth strategy?
A: Imran Nawaz, CFO, expressed confidence in Tesco's online business, highlighting its growth and market share gains. The online model benefits from operating leverage due to store fulfillment. Marketplace is still in a learning phase, with around 4,000 SKUs, and is expected to play a more significant role in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
