Citi analysts anticipate Tesco (LON: TSCO) will deliver robust Q3 results, supported by continued momentum in its core UK market.
In a note to clients this week, the bank said it expects “another solid performance” from the supermarket giant.
Ahead of its trading statement on January 9, Citi forecasts a 4% increase in UK like-for-like (LFL) growth for Q3, exceeding the consensus estimates of 3.1% and building on the 3.5% achieved in Q2.
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This forecast is said to be supported by “strong top line momentum highlighted in last week’s Kantar print.”
In the Republic of Ireland, Citi projects 3.2% LFL growth compared to the consensus of 2.8%, while Booker is expected to decline slightly at -1.8% (consensus +0.1%).
These combine to give Citi’s forecast for Tesco UK & ROI LFL growth of 3.1%, above the consensus of 2.8%.
Meanwhile, Central Europe is forecast to see modestly improving momentum, with a 1.6% LFL growth estimate in Q3, driving total Group Retail LFL growth to 3%, ahead of consensus at 2.4%.
Citi has also adjusted its forecasts to reflect updated share buyback progress and higher capital expenditures due to cost inflation.
For FY25, Citi estimates Tesco’s Retail EBIT at £2.97 billion, above Tesco’s guidance of approximately £2.9 billion and Retail free cash flow at £1.83 billion, higher than the guidance range of £1.4–1.8 billion.
These updates result in slight increases to FY25 and FY26 earnings per share estimates, up +0.4% and +0.8%, respectively.
With strong fundamentals and positive trends, Citi expects Tesco to continue outperforming expectations.
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