Tesco PLC (LON:TSCO) will close out the week with a trading update alongside its annual shareholder meeting, with its shares down 12% since the start of the year despite the higher sales the sector has enjoyed during lockdown.
Industry data has shown the FTSE 100 supermarket titan was one of the fastest-growing in recent months, with sales growth above 12%.
However, things are not perfectly smooth, as the company is facing a shareholder revolt at the AGM over the pay packet of outgoing chief executive Dave Lewis.
Lewis’s £6.4mln wage package is facing opposition from a large number of investors, with a majority vote against the payment fast becoming a possible outcome, according to some reports.
There is also likely to be more detail from Lewis about profits and perhaps about the size of the special dividend that the company has promised to pay out from the planned £8bn sale of its Thai and Malaysian businesses.
At the full-year results in April Lewis said that if sales return to “normal” by August, the boost to trading from the lockdown will be offset by “significant extra costs” incurred in dealing with the crisis.
Broker Shore Capital is expecting like-for-like (LFL) retail sales growth of 4.8% for the period, with 9% LFL growth in the UK division as “very strong” grocery retail sales are offset by weak catering activity from the Booker wholesale arm and poor general merchandising sales.
Analysts at UBS also recently said their research suggested that the threat from discounters Aldi and Lidl “is past its peak in the UK”, with Tesco a 'buy' for its sector-leading margins and cash returns.
Life on MARS?
Like-for-like sales were down 1% after 24 weeks up until the lockdown came in and due to the virus are forecast to have been down 42% in March, according to broker Peel Hunt, taking 6% off first half LFL sales and an estimated £17mln off first-half profit before tax.
The shares recovered some losses last month when the brewer and pub company agreed to spin off its brewery business into a joint venture with Danish giant Carlsberg, of which the Wolverhampton-headquartered outfit will own 40% and receive a £273mln cash payment.
FTSE 250-listed Marston’s said it will use the cash to pay down its debt, which stood at £1.4bn at the end of its September financial year and which the company has been aiming to reduce significantly by 2023.
With the shares still at half the level they started the year, investors will only be able to take solace from the brewing performance and wait until the government confirms when pubs can reopen
"Provided the JV transaction with Carlsberg UK goes to plan, Marston’s should benefit from a £239m cash windfall in September, putting the company in a strong position, having already secured financial covenant waivers from the bondholders," Peel Hunt's analysts said.
There will also be interest from non-investors in the group's plans for pub reopenings after the Prime Minister said on Tuesday that Saturday July 4 will be the date many people have been waiting for.
Significant announcements expected on Friday June 26:
Trading update: Tesco PLC (LON:TSCO)
Interims: Marston’s PLC (LON:MARS)