Tesco is expected to announce an increase in profit of as much as 12% when it releases its annual results next week.

Despite speculation that its US venture is struggling (see right), increasing competition from rivals and constraints on consumer spending in the UK, analysts are predicting a strong set of results.

Among the most optimistic is Citigroup, which expects underlying pre-tax profit to be up 11.7% to £2.84bn on sales up more than 10%.

Although Asda and Morrisons performed particularly well over the Christmas period, this had a minimal impact on Tesco's sales and profit, said another analyst.

"The improving fortunes of its rivals will have an effect, but Tesco started from such a strong base that this will be minimal," he added. "We still think the results will be strong."

Tesco has already indicated there will be no separate figures for the performance of its US chain Fresh & Easy, the expansion of which has recently been put on hold. "It will be mentioned but rather than any firm figures there is likely to be a broad brush statement about it being early days and how pleased they are with progress so far," said Andrew Wade, retail analyst at Seymour Price .

Wade didn't believe the situation in the US had caused Tesco to take its eye off the ball in the UK. "That is not the case," he said. "They have a totally separate team and a good structure globally so I don't think it will influence the UK operation."

Meanwhile, with about one out of every seven pounds in circulation spent in Tesco, there will be considerable attention paid to any comments made by Tesco chief executive Sir Terry about the long-term economic outlook.

However, analysts are not expecting any dramatic pronouncements. "We are not expecting anything other than a very cautious statement," said another analyst.rethink for fresh & Easy

Tesco has admitted changes may need to be made to its Fresh & Easy chain of US c-stores and that is why it has halted expansion for three months. Areas earmarked for possible change include self-service checkouts, the stark interiors, the lack of advertising, and product range - currently identical regardless of location.

"We need to understand all of these areas and whether things need to change," said a Tesco spokesman.

Neil Currie, a US-based retail analyst at UBS, said flexing the range to suit wildly differing demographics across the chain's 59 West Coast locations was likely to be high on the agenda. "The US is obsessed with target customers," he said.

Tesco said this was being looked at. "We might consider tailoring for demographics," the spokesman said. "We have the team in place with the expertise to know if that is something customers want."

Packaging and the focus on own-label products were also areas "we may need to reflect on", the spokesman added.

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