Tesco PLC - Q3 & Christmas Trading Statement
2022/23 Analyst Call
Thursday 12th January 2023
Transcript
Disclaimer
This transcript is derived from a recording of the event. Every possible effort has been made to transcribe accurately. However, neither Tesco nor BRR Media Limited shall be liable for any inaccuracies, errors, or omissions.
Ken Murphy: | Good morning everyone, and a very Happy New Year to you all. Thank you |
for joining us this morning. I'm here in Welwyn with Imran, and in a moment | |
we'll be delighted to take your questions. Before we do that, I want to share | |
a few highlights on the strong performance that we've announced in our | |
trading update this morning. | |
I want to start by saying a huge thank you to every one of our colleagues for | |
the brilliant Christmas they helped us deliver. As they have done consistently | |
throughout the challenging conditions of the last few years, colleagues have | |
once again gone above and beyond to make sure our customers could have | |
a great Christmas. I'm really pleased with the strength of the performance | |
we've seen in all our markets, especially given that we're trading over such a | |
strong performance last year. By delivering relentlessly on the strategic | |
priorities that we set out 18 months ago, we have made sure that customers | |
benefit from great value and quality in every part of their basket, however | |
they choose to shop with us. | |
The UK has had an exceptional quarter three and Christmas, driven by our | |
continued investment and innovation in the full breadth of our offer. Our | |
large and convenient stores served customers well throughout the entire | |
period, with online proving to be very resilient and returning to growth over | |
Christmas. We have seen customers continuing to trade down, but that has | |
taken a number of different forms, and we are seeing growth at both ends of | |
our offer, from the volume driven success of our Price Lock campaign, | |
through to the growth of our Finest range. For some customers, it's trading | |
down from national brands to great value Tesco products. For others, it's | |
seeking out Tesco from one of the higher priced, premium focused retailers, | |
or using our great range of ready meals to substitute for a takeaway or | |
restaurant meal. | |
Our value proposition of Low Everyday Prices combined with exceptional | |
value offered by Clubcard Prices and Aldi Price Match means that we are | |
the most competitive we've been for many, many years. We've continued to |
make great progress on Clubcard across the Group. Clubcard Prices has been a great success in the UK, and is proving the same in Ireland and Central Europe following the more recent launches. Clubcard has helped millions of customers spend less, which now more than ever is really important. Across the period, we launched nearly 400 new products, including over a hundred new Finest festive products, and we continued to build out and enhance our ready meal range. We're really pleased that all these efforts have been recognised by customers, with a significant increase in quality perception once again.
All of this great work has culminated in us delivering a strong market share performance in the UK and Ireland. Booker has also continued to grow strongly, despite a particularly tough catering backdrop, and our Central European business delivered its highest growth in many years. As you'll have seen, we are reconfirming our guidance from October for retail adjusted operating profit between £2.4 and £2.5 billion, retail free cash flow of at least £1.8 billion, and bank adjusted operating profit of between £120 and £160 million.
We always expect customers to tighten their belts after Christmas, and that's certainly what we've built into the plan for this year. I am delighted that last week we announced a new Price Lock, guaranteeing that customers won't pay more on over a thousand lines all the way through to Easter. We have also further invested in our Dinner for Tonight range, offering customers amazing value alternatives to eating out or getting a takeaway. I'm confident that whatever customers are looking for in terms of value and quality, they will be able to find it at Tesco.
Our performance continues to be strong, and we go into the new calendar year with good momentum. We have the right focus on value, quality, and range, along with the right strategy and team to deliver a strong performance whatever challenges we face. And with that, let's go straight to questions and answers. Thank you.
Call Operator: | If you wish to ask a question, please dial *1 on your telephone keypad now |
to enter the queue. Once your name is announced, please ask your | |
question. If you would like to cancel your place in the queue, you can do so | |
by pressing *2. So once again, that is *1 to ask a question. If you are asking | |
a question, please remember to mute your online webcast to avoid any | |
feedback. Our first question comes from Andrew Gwynn of BNP Paribas | |
Exane. Please go ahead. | |
Andrew Gwynn: | Good morning, and Happy New Year. So yeah, two questions if I can. Firstly, |
and I appreciate you're not going to give precise colour on next financial | |
year, but help us with some of the building blocks. I think market's still very | |
rational. Given the profit guidance essentially unchanged almost from the | |
beginning of the year, seems to be you're in very good control, and maybe | |
some of the cost pressure is slightly lower, albeit skewed towards SG&A, so | |
wages and energy. So just help us out with some of those building blocks. | |
And then secondly, you touched on it there, but obviously an expectation | |
that the consumer may tighten their belts after Christmas. Is that what | |
you've seen in the data? Thank you very much. | |
Ken Murphy: | Good morning Andrew, and thank you for the question. I think let's start with |
the second point, and maybe I'll hand over to Imran. I would say that | |
customers tighten their belt every year in January, February. That's kind of a | |
normal trading pattern. We've planned for that, and largely the customer | |
trading behaviours and patterns are playing out more or less the way we've | |
planned it. So I would say to you that we've had a decent start to the year, | |
and that would be the first thing to say. | |
I think the second question, before I hand over to Imran, is that largely | |
you've answered your own question. I think we would be looking at the same | |
building blocks. Clearly we can't give you visibility beyond that, but let me | |
hand over to Imran and he'll give you his sense of it. | |
Imran Nawaz: | Morning Andrew, how are you? So just a few thoughts. |
As you point out, we're coming off a very strong performance this year, and | |
as you also said, guidance is pretty much largely unchanged throughout the | |
entire year. And this year we faced quite a lot of opex costs, if you think | |
about the energy, if you think about payroll, you think about the Covid | |
unwind. And I would expect, as we've always been said, that next year we | |
expect to see similar pressures continue. | |
Without going into detail, because I will absolutely give you guidance and an | |
understanding of how we see next year when we meet in April, but I would | |
say to you what gives me confidence is how well we've managed to do what | |
we've been doing this year, the discipline on our Save to Invest program this | |
year. We're in a good place also for next year, and clearly I feel we have, I | |
would say the right offer, the right strategy, the right team to continue to do | |
well. So when we meet in April and talk, we'll absolutely give you a fuller | |
picture of how we see the world evolve. | |
Andrew Gwynn: | Okay, thank you very much, and well done to you and the teams. Thanks. |
Ken Murphy: | Thanks Andrew. |
Call Operator: | Our next question comes from Clive Black, Shore Capital Market. Please go |
ahead. | |
Clive Black: | Well, good morning gentlemen. Thank you for the update. And yeah, well |
done on a very strong trading period. A couple of questions for me therefore, | |
Ken, you talked about trading down in your commentary, with quite a few | |
moving parts there. I just wondered if you could maybe order the importance | |
of those moving parts in terms of how you see it in the business. You | |
mentioned switching out of restaurants into retail and so forth. And then just | |
secondly, maybe a little bit of an anorak question, but I imagine volume | |
across the whole business was hard to come by. I just wonder what that | |
means for your working capital and how that feeds into your free cash flow | |
given that supermarkets have tended to have negative working capital, they | |
would be helpful to have updates on. Thank you. |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Tesco plc published this content on 12 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 January 2023 08:19:04 UTC.