Sales up at Tesco but supermarket urges rate cut

Supermarket giant, Tesco, has announced that sales in the 13 weeks to 24 November were up 11.8%. Like-for-like sales in the UK rose 4.1% in the same period. The company bucks the trend as other retailers are nervous about mortgage costs and fears of an economic slowdown.

However, the company has admitted it would like to see a cut in interest rates. Tesco, the biggest player in the British grocery market with a 30% share, said our firm view is that we should be seeing a move down in interest rates sooner rather than later.

The Bank of England’s Monetary Policy committee will announce their decision on interest rates tomorrow. Many analysts believe a rate cut won’t occur until early next year.

Tesco’s UK result was slightly below some forecasts, suggesting that its market share may be slipping as Sainsbury’s and Morrison’s improve their offer.

Tesco’s chief executive, Sir Terry Leahy, said we’ve maintained pleasing progress during the third quarter across the group, international delivering a particularly strong performance and the UK has again done well.

Tesco shares are up 8% this year and were yesterday at 488p. Numis Securities forecasts it will make a profit of £2.87 billion in 2008 and gives a share-price target of 570p.

Tesco has recently embarked on an ambitious expansion plan on the west coast of America. It has recently opened its first Fresh & Easy Neighbourhood Market in the city of Hemet which is about 75 miles east of Los Angeles. The company has said it will spend £250 million a year over 5 years on its US expansion.

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