Russ Mould, investment director at AJ Bell, said: “Tesco may see full-year profit coming in at the top end of expectations, but its festive update did not pass the smell test with investors after a slowdown in underlying sales growth over Christmas.
“These numbers are not a disaster as the company has its highest share of the British grocery market in more than 10 years.
“A more than doubling in the share price from the 2022 lows means the company will be judged more harshly for the slightest misstep.
“The wholesale division Booker is a notable drag on performance. While this largely reflects a declining tobacco market, the market will still be looking for improvements despite the difficult backdrop.
“Tesco’s online sales were a positive, including significant growth in its Whoosh delivery services.
“The economics of web-based groceries improve with scale so the company will hope these trends continue.
“The recent strong Christmas trading by the discount names Aldi and Lidl shows competition is intense, even if Tesco is well placed among the established supermarkets to fight back.
“Offering discount prices through its Clubcard scheme enables it to drive customer loyalty while offering the kind of value the UK’s hard-pressed households are looking for.”
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