Tesco reports sluggish growth

Tesco has put out sales figures showing a 0.1 per cent rise in like-for-like sales in the second quarter, reflecting stuttering growth throughout the UK. The outlook for improvement also remains bleak.

"We expect this [low growth] situation to remain for the short- to medium-term as there is no sign of a catalyst for significant improvement," said The Share Centre’s Graham Spooner.

"There are still uncertainties in the sector and other retailers have noted the continued challenges faced as a result of a cut in consumer spending...but Tesco remains our preferred play in the sector."

Spooner, an investment analyst, pointed out that the supermarket’s high-end "Finest" range experienced an increase of almost 10 per cent in like-for-like sales, indicating that consumers feeling the squeeze are treating themselves at home rather than dining out. He also said that strong growth in Asia made Tesco attractive.

Many UK funds hold the industry giant, but only 10 have more than a 4 per cent weighting. Most are UK-focused, with some using it as an income generator, while others see it as a growth play.

Funds that hold Tesco

Fund	% Tesco holding
Cazenove - The Capital	4.85
Fidelity - Equity Growth Defender	4.4
Fidelity - Growth & Income	4.4
Fidelity - Moneybuilder Growth	4.4
Fidelity - UK Specialist	4.4
Gartmore - UK Alpha	4.6
Gartmore - UK Growth	4.6
L&G - Ethical	4.48
Octopus Investments - CF Octopus Absolute	7.36
Vanguard - FTSE UK Equity Income Index	4.6

Source: Financial Express Analytics

The best-performing fund over the past year is Gartmore’s £30.5m UK Alpha fund. Its longer-term performance is disappointing, though, having lost investors 14 per cent over three years, and 13 per cent over five years.

Of those with a five-year track record, Cazenove’s £13.5m Capital fund, run by Gillian Lakin, is the most consistent performer. It has returned 24.5 per cent, 15.3 per cent and 28.9 per cent over one, three and five years respectively.

Performance of fund vs sector over 1-yr



Source: Financial Express Analytics

It also took on less risk than all of the other funds over 12 months, apart from one tracker, and had around the same volatility as its sector over three and five years.