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FTSE 100: Tesco Share Price Gains on Improved Annual Profit Outlook
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FTSE 100: Tesco Share Price Gains on Improved Annual Profit Outlook

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Tesco shares were trading up today after the company announced its half-year results for FY23/24 with higher sales and profits. The company also raised its profit forecast for the full year.

The share price of UK-based Tesco PLC (GB:TSCO) gained over 3% after the company increased its annual profit outlook. The company remains confident in its full-year numbers despite posting lower sales for its home and clothing segments in its first-half earnings report for FY23-24. Tesco further stated that the inflationary pressures are expected to ease in the second half, driving more profits for the company.

The group now anticipates achieving a retail-adjusted operating profit between £2.6 billion and £2.7 billion for the year ending February 2024. This marks an increase from the previous forecast of about £2.5 billion. The expected retail free cash flow for this year is between £1.8 billion and £2.0 billion, surpassing its medium-term guidance range of £1.4 billion to £1.8 billion.

The Tesco share price was trading up by 3.25% today at the time of writing.

Tesco, a prominent retailer in the UK, specializes in offering a range of groceries and general products. The company operates through various store formats and has a significant online presence.

Interim Results 2023-24

Tesco reported an 8.9% growth in group revenue, totalling £30.7 billion, for the six months ending on August 26. The profit also saw a significant surge, climbing from £252 million to £929 million. In the domestic UK market, like-for-like sales experienced an 8.7% increase in the first half, attributed to a robust performance across various formats and channels. However, the home and clothing department, constituting approximately 7% of UK sales, faced challenges with a 4.8% decline in sales.

The adjusted operating profit for the retail segment reached £1,417 million, reflecting a 13.5% increase at constant rates. This figure includes the delivery from the save to invest initiative, amounting to approximately £290 million.

Is Tesco Share a Good Buy?

Post-results, analyst Izabel Dobreva from Morgan Stanley reiterated his Buy rating on the stock, predicting 13.8% growth in the share price.

Analysts hold a bullish view regarding TSCO stock, as evidenced by its Strong Buy rating on TipRanks. This includes five Buy and one Hold recommendations. The average Tesco share price prediction is 308.50p, which is 15.1% higher than the current trading levels.

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