Tesco (TSCOLN; Baa3, BBB-, BBB-; S) Q1 (3m ending May) Earnings Call

Nothing of significance in earnings call, cash lines relatively firm (€ +1-3/£ -2 to +2) through this morning's +2-12bp IG sell-off. Cheap views on €31s (+1.5) and new £34s (+1) still valid.

• Saw spending holding up well particularly in food with volume growth across all markets and notes clothing volume growth. Base assumption for inflation is LSD/1-2% range for remainder of the year.
• On wholesaler Booker (-1.3%); it expects Best Food Logistics (-6.8%) and Tobacco (-5.2%) to "stay in negative territory for rest of the year" and notes low margin/low impact and says accounted for in guidance. We have no numbers on profit contribution but mgmt did disclose "less than handful of million" from Best Foods - FY24 guidance is for >£2.8b (i.e. negligible). We'd also note on headline sales last year, Tobacco was 3% and best foods 2.5% of group.
• Catering (+2.2%) and Retail (+1%) expected to drive Booker growth, mgmt adding this quarters gains are impressive given cycling over 10.8% and 6.3% growth respectively from last year.
• On Central Europe (+0.6%) was asked about the ~expected rebound in profitability; mgmt said performing in-line. Segment made up 7% of retail revenue last year but margin fell from 4.1% to 2% leaving profit down -50%yoy and at only 3% of group. It was pointing to energy costs, weaker volumes and regulator actions in Hungary (tax and price caps) then - we are not too concerned given size.

Initial numbers and Equity takes.