Tesco disappointed some analysts this morning, but let's not get things out of proportion.
Tesco
(LSE: TSCO)
shares were down 2% following a trading update this morning, versus a relatively stable FTSE. Not that any there was any 'bad' news as such, just that like-for-like sales (excluding petrol) were towards the lower end of analysts' expectations, at 4.5%.
Total sales grew by 10.4% in the 13 weeks to the end of May, with growth of 9% in the UK. To some extent, this was achieved by cutting prices -- Tesco claims average price deflation of 1.4%.
OK, so like-for-like sales may not be growing quite as quickly as before, but this is still a good set of figures. Remember, consumers are supposed to be feeling the pinch at the moment. Brokers' forecasts for full-year growth are 7.25%, so 10% up in the first quarter puts Tesco ahead of the game.
And at a time when inflation is one of the main concerns in the economy, Tesco managed to cut prices -- my guess is that their suppliers bore the brunt of these reductions, if past experience is any guide. You can do that when you're Tesco.
So unlike Mr Market, I'm not worried about this morning's update. The shares have held up remarkably well during the recent stock market falls, and this morning's little wobble shouldn't faze anyone. Tesco management have proved to be very sure-footed so far, and I'd give them the benefit of any doubt.
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