Market Analysis: Supermarkets - Tesco

Tesco: Increase in consumer confidence; loyalty card usage is crucial to win market share; Convenience store format continues with strong growth

In the UK supermarkets space, Orwa Mohamad, Analyst at Third Bridge remarks on Tesco informed by the insights from industry experts:

“Tesco is maintaining the strong progress it had during Christmas into the first quarter. Our experts note an increase in consumer confidence, influenced by factors such as the reduction in the main rate of employee National Insurance, the energy cap decrease in April, and lower mortgage rates.

“Food inflation is expected to align with headline inflation and decline to 4-5% in Q2 2024 as oil prices decrease.

"The margin is improving because inflation is decreasing and consumer confidence is rising. Customers are spending more on higher-priced items. Tesco's investment in robotics and technology to reduce labour costs is also paying off.

“Our experts anticipate intensified promotional activities across UK supermarkets to compete for market share, particularly focusing on everyday essentials and pantry staples. Loyalty card usage becomes crucial, with Tesco's Clubcard leading.

“Convenience store format continues with very strong double-digit growth, especially Tesco Express, benefiting from the return to offices in city centres.”