Tesco

Tesco posted strong Q1 trading performance with sales growing 4.6% lfl (+5.1% in the UK). 

Booker also posted better performance with sales growing 2% to £2.3bn.

The company says that the market remains intensely competitive, as highlighted by Asda's strong price investment.

FY Outlook guidance was confirmed but we believe that the management guidance is cautious and we expect the company will meet and even exceed the upper end of the guidance of £3bn  (we have £3.11bn in our estimates). 

The momentum remains extremely strong and in food retail, organic topline growth is the name of the game. Following the strong rise in share price, we now only have 10% upside potential and valutaion is becoming mre stretched with PE 26 (Feb) and 27 at 14.1x and 12.7x respectively and is now more expensive than Colruyt. Carrefour is in our expert's opinion by far the most underrated stock in the sector with strong double digit EPS growth and a 50% discount to sector valuation ratio.