Tesco consolidates recovery after recording a second successive quarter of sales growth
TESCO has marked the next stage in its recovery by recording a second consecutive quarter of like-for-like sales growth after returning to positive numbers for the first time in three years.
Announcing a 0.3 per cent like-for-like sales growth in the UK (and 0.9 per cent group growth), chief executive Dave Lewis said he was encouraged by the progress the group was making, just two years after it made the biggest corporate loss in UK retail history.
The supermarket giant also announced the proposed sale of its Harris + Hoole coffee chain to Caffé Nero.
Mr Lewis said that, after stabilising the business, Tesco has now built a strong operational foundation.
“By growing volumes, transforming the way we work together with our suppliers, and further optimising our store operating model we are rebuilding profitability in a sustainable way,” he said. “I am confident the improvements we are making for customers are working and will create long-term value for our shareholders.”
The growth came in spite of a 0.7 per cent deflationary impact on sales in the quarter, which means a weekly shop at Tesco costs six per cent less than it did in September 2014.
Tesco reported that sales from multi-buy promotions – once a major footfall driver – were down 42 per cent as it focused on everyday value.
Tesco said that its customers are able to save almost £1.60 on a basket of 10 popular meat, fruit and vegetable lines by selecting products from seven recently launched brand ranges.
In a bid to improve margins that have been eroded by this ongoing deflationary pricing, Tesco said it was working with suppliers to improve efficiency and leverage its scale.
Mr Lewis said: “[This will] enable us to fund further investment in the customer offer and continue to rebuild profitability.”
Tesco said volume growth in produce and meat was outperforming the market by about five per cent.
Having invested in a 49 per cent stake of coffee chain Harris + Hoole in 2013, Tesco only acquired the remaining 51 per cent three months ago.
The chain has no Scottish branches.
Its proposed sale follows the disposal of Dobbies Garden Centre and the Giraffe restaurant chain as chief executive Dave Lewis returns the group’s focus to its core activities.
It retains its ownership of Dunnhumby, the data firm behind its Clubcard loyalty scheme, after abandoning plans to sell it last year. Tesco declined to comment on whether it was reconsidering selling Dunnhumby.
“In both the UK and internationally, we are putting customers at the centre of everything we do and reconfiguring our business to serve them a little better every day,” said Mr Lewis.
After many travails in its overseas business, like-forlike sales were up three per cent internationally, driven by a fourth consecutive quarter of positive growth in Europe and Asia.
David Stoddart, analyst at Edison Investment Research, said the results were encouraging: “As one would expect, in a competitive industry, Tesco is having to invest to drive sales.
“[This strategy] seems to be working as the number of UK transactions increased by 1.7 per cent. Tesco is working very hard for small gains.”