FTSE forward look: Could Tesco and Sainsbury’s defy recession fears?

The UK’s two biggest grocers are expected to disclose bumper Christmas sales despite continued pressure from the cost-of-living crisis.

Investors will be keen to hear how shopper sentiment is faring when the bosses of Tesco and Sainsbury’s provide updates to the stock market this week.

Tesco will say how it performed over the quarter to the end of November in its latest update on January 12.

Investors will also be particularly keen to hear how sales have performed over the last few weeks amid hopes there would be an uptick over the Christmas period as shoppers cast concerns over budget constraints to one side.

Analysts have already suggested that Tesco’s latest figures could make for positive reading.

James Grzinic, equity analyst at Jefferies, said: “An upbeat Xmas reporting season in the UK should be confirmed by Tesco, with solid Q3 sales followed by a post-Covid boosted festive period.”

Jefferies said it expects the update to show UK like-for-like growth of 4% over the third quarter and an increase of about 5.5% for the six weeks to January 8, covering Christmas and New Year.

It pointed to strong sales for the group’s Booker wholesale arm as it continues its post-pandemic recovery.

The update will come a day after rival Sainsbury’s announces its latest trading on January 11.

Early data from Kantar suggested that the two supermarket chains could perform similarly well, recording 6% growth for Tesco over the 12 weeks to December 25, and Sainsbury’s delivering 6.2% growth.

Sainsbury’s will confirm how accurate this really is, but it paints a broadly positive picture for shareholders given continued pressure from cost inflation.

Shore Capital’s Clive Black said the retailer has “traded robustly” recently and suggested that grocery retailers could have gained market share across the retail sector last month.

He added: “With a postal strike hitting elements of the online retail trade from mid-December, we will observe with interest how Argos performed through the Christmas period as well.”

Sainsbury’s has been among retailers to focus heavily on investing to keep prices low, amid inflationary pressures and the rapid growth of German discounter rivals Aldi and Lidl.

Last month the retailer committed to pumping a further £50 million by March 2023 to keep a lid on pricing.

However, shareholders will be keen to assess how rising costs and pricing investment could be affecting the group’s profit outlook.

Susannah Streeter, senior investments and markets analyst at Hargreaves Lansdown, said: “While this is the right move from a competitive angle, it’s already been affecting profits, which fell 8% in the first half, and so investors will be keen to find out to what extent this trend has continued.

“But hanging on to customers and luring in new shoppers should help put the company in a better position once inflationary pressures fall back.”

Other trading announcements this week:

Monday 9 January

Cairn Homes plc (CRN)

Intermediate Capital Group plc (ICP)

Tuesday 10 January

RS Group plc (RS1)

Wednesday 11 January

Barratt Developments plc (BDEV)

Grafton Group (GFTU)

JD Sports Fashion plc (JD.)

PageGroup plc (PAGE)

Sainsbury (J) plc (SBRY)

Ten Entertainment Group plc (TEG)

Vistry Group Plc (VTY)

Thursday 12 January

ASOS plc (ASC)

Dechra Pharmaceuticals plc (DPH)

Gym Group plc (GYM)

Marks & Spencer Group plc (MKS)

Persimmon plc (PSN)

Tesco plc (TSCO)

Whitbread plc (WTB)

Wood Group (John) Plc (WG.)

Friday 13 January

MJ Gleeson plc (GLE)

Taylor Wimpey plc (TW.)

Press Association