Tesco warns of bumpy ride ahead despite sales growth

The City turned on Tesco as the supermarket giant's chief executive warned its nascent recovery could prove to be a bumpy ride.

Dave Lewis, who began a turnaround of the group in 2014, said the business had “stabilised” but “the market remains challenging, deflationary and uncertain”.

There was no profit forecast for its current financial year, with Lewis (pictured) saying only there would be “continued improvement in profitability”.

“Recovery in Tesco will not be the smooth line some of us might like to draw and we are trying to guide the market that that’s how we see it,” he said. “It’s a turnaround situation so it’s more uncertain that it would be at another time.”

Tesco shares at one point dropped nearly 5% on the back of the cautious outlook, as well as some profit-taking on a near-30% rally since the start of the year. They were down 7.2p at 189.1p despite a return to profit in Tesco’s year ended in February.

Statutory profit was £162 million — a far cry from 2015’s £6.3 billion loss, the biggest-ever on Britain’s High Street.

The group’s operating profit before exceptional items was up by 1.1% at £944 million, ahead of the expected £932 million.

More significantly, quarterly, same-store sales grew for the first time in three years, climbing 0.9% in the UK and 1.6% overall during the quarter which included the all-important Christmas period.