TESCO is expected to take a bashing when it reports third-quarter figures this week.

The supermarket giant is tipped to announce a sharp slowdown in like-for-like sales growth in its core UK business from 4% this time last year to between 1.1% and 2% - its worst performance since the 1990s.

Any sales growth at all for a retailer in these market conditions could be regarded as a positive result - but unfortunately for Tesco its figure will look measly when set against better numbers from rivals J Sainsbury, Asda and Morrison.

After several years of having everything its own way, Tesco now has to contend with the fact that its competitors are doing well and seizing market share.

Tesco will no doubt argue that its third-quarter UK figures are up against tough comparatives from last year and they have been deflated by a new discount range that has pushed down the average sale value.

But this is unlikely to assuage City fears that the shine is coming off this once revered retailer’s halo.

Add in worries about a slowdown that will dent Tesco’s nonfood sales, economic problems in many overseas markets including Ireland, Hungary and America, and it is easy to make a bear case on the stock.

But all this would be to miss the point. Betting against Tesco is usually foolish. First, this is a juggernaut of a business founded on hard graft and it knows a thing or two about grinding out growth in difficult markets. Second, Tesco is the only supermarket that has a geographic and sectoral spread. Its international footprint is now much bigger than its UK footprint in terms of millions of square feet of selling space, and even though the overseas arm has some obvious weak spots right now it is still tipped to deliver like-for-like sales growth of more than 25%. Everyone likes to gossip about problems with Fresh & Easy, Tesco’s new American convenience-store concept, but it is worth remembering that the turnover of the whole fledgling American business is still less than the company generates from a single store in Newcastle upon Tyne.

Perhaps most importantly, Tesco is a rare breed in these volatile markets. It is a company with a great portfolio of assets, stellar cash flow, no real financing issues and a safe dividend. Which other retailer has the scope to pull off two £1 billion acquisitions using cash in these markets? Over the medium term, while rivals and discounters like Aldi and Lidl will prove stiff competition, it still has the potential to deliver significant growth from its international and retailing services arms.

The company recently bought out the share it didn’t already own of a personal-finance joint venture with Royal Bank of Scotland and it is expected to capitalise on consumer disenchantment with the banks by launching mortgages and current accounts next year. Analysts at Credit Suisse predict this is just one of a number of initiatives that could more than double revenues at the retail services division to £1 billion in the next five to seven years.

Tesco shares have already plunged by more than 40% in the past 12 months valuing the company at £23 billion. If people loved it when the shares were touching 500p a year ago, they should really love it now they are 295p in these hard pressed times.

Berkeley Group

HOUSEBUILDERS have had a torrid time since the start of the year, but Tony Pidgley, founder of Berkeley Group, looks pretty smart right now. Sector gossips reckon the company - due to update the market on trading this week - is sitting on an estimated £200m cash pile. With no debt burden it is lucky enough to be able to sit tight and wait for the upturn.

jenny.davey@sunday-times.co.uk

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