Tesco Q3 sales growth accelerates on finest line
LONDON: Tesco Plc, the U.K.'s largest supermarket chain, said sales in the peak Christmas period are ahead of its forecasts after domestic revenue growth accelerated in the third quarter on demand for Finest premium foods.
Sales at U.K. stores open at least a year rose 0.7 percent to 0.8 percent, excluding fuel and value-added taxes, in the 13 weeks ended Nov. 27, Finance Director Laurie McIlwee said today on a call with journalists. That beat the 0.3 percent median estimate of nine analysts surveyed by Bloomberg News.
The quarter ended with U.K. sales growing at twice the pace of the overall period, McIlwee said. Tesco, which gets about two-thirds of sales in its domestic market, has expanded its Finest range, given more space to seasonal merchandise and doubled rewards on its loyalty program to win shoppers. Grocer discounts are at record levels in the U.K., where Britons are spending less ahead of government-spending cuts and tax hikes. "Tesco exited the quarter strongly," Philip Dorgan, an analyst at Altium Securities, said in an e-mailed note. The sales were "marginally better than expected."
Tesco rose as much as 1.7 percent in London trading and was up 5.05 pence at 425.05 pence as of 8:17 a.m. The shares are little changed this year.
Holiday sales so far are "ahead of expectations," McIlwee said. "This will be our biggest Christmas ever with more stores open and our strongest-ever range," he said.
U.K. sales were boosted by a shift among consumers toward better quality products, including the Finest range, Tesco said. Same-store revenue from non-food products rose 3 percent, helped by sales of a dress like one worn by Kate Middleton after the announcement of her engagement to Prince William. Sales at the Tesco Direct online unit surged 30 percent, McIlwee said.
U.K. same-store sales, including value-added tax and excluding fuel, was 3 percent as the quarter ended, compared with 1.5 percent for the entire period, the executive said.
"There's a good recovery going on in the economy, it's slow but steady," he said.
Snowy conditions across the U.K. have had an impact on sales, particularly in Scotland, according to the finance director. Tesco has 3,000 tons of grit and 150 quad bikes to clear snow from car parking lots, he said. Food-price inflation was 0.7 percent lower than in the previous quarter, McIlwee said. A pace of 1.5 percent as an "exit rate" for this year "isn't a bad assumption," he said. International same-store sales climbed 4.1 percent in the quarter, led by growth in Asia. -Bloomberg