Tesco expected to report flat sales

Britain’s biggest grocer has been hit hard by the economic downturn because compared to rivals it sells a higher proportion of non-food items, where consumers have cut back the most.

It is also the most affected by the growth of discounters Aldi and Lidl according to JP Morgan Cazenove, until last week Tesco’s house broker.

It suggested Tesco could “go through a painful rebasing of pricing and the gross margin, synonymous to a profit warning” though Shore Capital analyst Clive Black said another profit warning like that of January 2012 – then Tesco’s first in over 20 years – would go against recent signals from the company.

According to market research, Sainsbury’s is the only one of the Big Four grocers, which also includes West Yorkshire’s Asda and Morrisons, to increase its market share over the past year.