After posting strong first-quarter sales figures, Tesco signalled some relief for squeezed shoppers, having seen “encouraging early signs” that food inflation was starting to slow.
Over the 13 weeks to 27 May, the group’s like-for-like sales in the UK climbed 9.0% to £10.8bn, driven by higher prices. Tesco noted that its larger stores were performing particularly well (+9.9%) compared to its convenience outlets (+5.9%). Meanwhile, online sales grew 8.2% despite the return to shopping in-store.
Tesco admitted it was seeing modest declines in volumes, particularly in discretionary categories such as general merchandise. However, the group noted that it was benefitting from cash-strapped consumers looking to save money by cooking and entertaining at home rather than dining out. People are also still treating themselves, with sales of its premium ‘Finest’ range up 14.9%.
The retailer highlighted its efforts to offer value for its customers, with it increasing its ‘Aldi Price Match’ initiative to around 700 lines and seeing a “strong volume response” to its latest price-lock on over 1,000 products.
“We do believe that we’re past the peak inflation,” Chief Executive Ken Murphy said this morning.
In recent weeks, Tesco and other supermarkets in the UK have been cutting the price of everyday items such as milk, bread, sunflower oil, and pasta to reflect falling commodity costs. However, whilst calling these cuts early positive indicators, he warned that the cost of some other products, such as meat, sugar, coffee, rice and potatoes, were still rising.
Murphy hit back at critics that have raised concerns about profiteering by manufacturers and supermarkets during the inflation crisis. He denied this was the case, saying: “We react pretty quickly when we see those commodities come down.”
Murphy noted that food prices were made up of more than just commodity costs, highlighting that energy costs were also higher and labour costs were still increasing due to a shortage of workers in Britain.
Pointed out that wages were “materially higher than they were two years ago”, he added: “What’s important here is the purchasing power of the family. That’s really where we should be focused on improving people’s purchasing power so that they can continue to feed their families and live a decent life.”
Elsewhere in the Tesco business, Booker saw its like-for-like sales grow 8.4% to £2.28bn (Retail: +6.3%, Catering: +10.8%).
In Ireland, like-for-like sales climbed 7.3% to £714m. However, in Central Europe, the increase was just 1.1% as cost of living pressures hit consumer spending.
