As expected, Tesco has reported slower sales growth in its core UK business, although it stressed that it had outperformed a “subdued” grocery market.
In its first quarter to 25 May, like-for-like sales in the UK retail operation edged up 0.4% as it faced tough comparatives with the same period last year, which was boosted by good weather and the royal wedding. It was still the group’s 14th straight quarter of growth, although well down on the 1.7% rise recorded in the previous quarter.
Total UK sales fell 0.4% to £9.1bn, impacted by the group’s decision to close its non-food Tesco Direct business last July – a move which impacted growth by 0.8%.
Tesco stated that it had outperformed the market in both sales and volume terms (by +0.2% and +1.3% respectively) as it made “further investments in range, price and loyalty as part of our ‘100 Years of Great Value’.” It highlighted that fresh food volumes were particularly strong in prepared foods, bakery and dairy, whilst it delivered a “strong Easter performance”. Online grocery sales were up 7% year-on-year.
As well as the tough comparatives with last year, Chief Executive Dave Lewis blamed the slowdown on “some weakness in consumer sentiment in the UK…Clearly part of that is down to the political situation. The other element is the weather.”
Like-for-like sales growth in its Booker unit slowed to 3.1%, compared to 4.3% the previous quarter. However, Tesco stressed that the wholesaler was still growing well after lapping strong performance last year that had been driven by one-off contract wins. Its ‘Joining Forces integration programme continued with customers said to responding positively to an improved offer in fresh food and the introduction of new lines.
In Ireland, Tesco returned to like-for-like growth having recorded a 0.4% fall the previous quarter. Sales rose 1.3% in the latest period, helped by its ‘You Won’t Pay More’ campaign in addition to couponing activity.
In Central Europe, like-for-like sales fell 4.9%, held back by weak performance in Poland and cooler weather across the region.
In Asia, like-for-like sales edged up 0.1% with a “stronger customer offer” said to have contributed to a better performance across all its formats and categories.
NAM Implications:
- Does anyone still need convincing that we are in effective flatline demand…
- …with increasingly savvy and concerned consumers voicing their worries via their feet…
- …despite reassurances by increasingly confused/ing politicians working to diverse agendas…
- …and the same goes for other countries.
