Markets focus on supermarket growth and travel woes

The UK’s biggest supermarket chain will reveal for the first time the affect of its £500 million “big price drop” campaign, which saw the cost of 3,000 items slashed, in a trading update on Thursday.

Tesco, which has more than 2,700 stores in the UK, fired the first shots of a price war at the end of September, in a bid to maintain market share in the run up to Christmas.

The offensive triggered an aggressive response as competitors soon responded with their own schemes, such as Sainsbury’s “brand match” campaign and Asda’s move to bring petrol pump prices down.

Tesco revealed its worst sales performance in two decades at the half-year stage, with sales excluding new store space, VAT and petrol down 0.9 per cent, but this covered the period before the new price-cutting campaign kicked in. However, Rod Salmon, an analyst at brokers Numis Securities, does not expect any change in the trading situation as the impact of the campaign will have been diluted by both the deteriorating economic climate and moves made by competitors to maintain a level playing field.

Numis sees the grocer reporting a decline in UK like-for-like sales, excluding VAT and fuel, of 0.3 per cent.

The group’s profits, which were up 12 per cent at £1.9 billion in the last financial year, have been driven by solid sales in its international division, boosted by continued growth in South Korea, China and India, although a previously strong Thailand is likely to have been hit by the flooding in Bangkok.

Britain’s biggest holiday firm, TUI Travel, will hope a robust full-year performance will remove it from the shadow cast by its struggling second-place rival Thomas Cook.

The owner of Thomson Holidays and First Choice is today expected to report a 5 per cent increase in underlying earnings to £468m in the year to 30 September as higher prices compensate for lower bookings.

TUI said the total number of UK customers going away with the firm was down 1 per cent this summer, while average selling prices were up 5 per cent, but the company was lifted by a late increase in bookings in markets outside the UK.

The company will want to distance itself from Thomas Cook, which spooked holidaymakers and investors last week when it turned to its banks for extra support in the wake of deteriorating sales.

TUI has seen its shares fall 33 per cent since the start of the year as fears over Thomas Cook, which has seen its own shares plunge 90 per cent, and the wider industry take hold.

With passengers bracing themselves for further hikes in rail fares next month, Perth-based transport group Stagecoach is set to reveal it is also feeling the pinch when it provides half-year results on Wednesday.

Its UK rail division is likely to post a loss for the first time in ten years, due to the poor performance of its East Midlands Trains franchise, which will offset the stronger performance of South West Trains.

The group is set to report a 21 per cent fall in underlying profits to £86m in the six months to 30 September, according to analysts, as its performance is dragged down by its rail division. Stagecoach’s shares more than doubled in the past year as commuters switched to public transport.