Tesco sales fuelled by drive to keep prices in check

Tesco's takings were boosted by a 2.7% jump in food sales. Picture: Michael Gillen
Tesco's takings were boosted by a 2.7% jump in food sales. Picture: Michael Gillen
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Tesco has reported rising first-quarter sales as the supermarket giant said it was reaping the rewards of offering customers lower prices in the face of rising inflation.

UK like-for-like sales in the first quarter of the year rose 2.3 per cent, driven by a 2.7 per cent comparable sales growth in food.

• READ MORE: Food helps fuel Scottish sales growth but concerns remain

The figures represent the sixth consecutive quarter of positive sales momentum and come after chief executive Dave Lewis hailed the retailer’s first full year of sales growth for seven years in May.

Lewis said: “In tough market conditions, we have stayed true to our commitment to helping customers, working closely with our supplier partners to keep prices low.

“Customers have responded by doing more of their shopping with us and as a result we continue to grow volumes, particularly in fresh food.”

Tesco sales were boosted by its fresh food offering, which saw “significant market outperformance”.

• READ MORE: Tesco hit with £129m fine over accounting scandal

John Ibbotson of consultancy Retail Vision said: “Food, and fresh food in particular, is firing on all cylinders and that’s a huge shot across the bows for its competitors, in particular Morrisons.

“With inflation rising sharply, Tesco has used its immense buying power to keep prices lower for its customers. Against this inflationary backdrop, the numbers are all the more remarkable. But the toxic combination of rising inflation and low wage growth remains a major threat.”

Tesco said it is working with suppliers to protect customers from inflationary pressures and pledged shoppers will see further price reductions, focused on fresh food and healthy products.

It comes after official figures earlier this week showed inflation surged to 2.9 per cent in May, which was higher than expected.

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Lewis added: “This is a good start to the year, with our sixth consecutive quarter of positive like-for-like sales growth across the group.

“We are confident in our plans to create long-term, sustainable value for our key stakeholders and to deliver on the ambitions we have set out.”

Like-for-like sales across the group rose 1 per cent, although Tesco was held back by a 3 per cent fall in comparable sales at its international division.

In the UK, fresh food volumes grew by 1.6 per cent in the quarter after the grocer reduced prices on a range of fruit and vegetables and more than 200 other healthy products.

Later today, Tesco will hold its annual general meeting, with Lewis’s generous relocation package set to come under scrutiny. He was handed a £142,000 benefits package to help him relocate from London to near the supermarket’s Hertfordshire head office.

Shareholder lobby group Pensions & Investment Research Consultants has advised investors to oppose the award at the AGM after deeming it inappropriate, but Lewis insisted it was the “same policy for me that we use for any other store manager”.

• READ MORE: Tesco agrees bumper tie-up with wholesaler Booker

Tesco is also likely to face questions over its proposed £3.7 billion merger with food wholesaler Booker, a deal that is subject to a Competition & Markets Authority (CMA) investigation.

The CMA is assessing whether the deal could reduce competition and choice for shoppers.

Lewis said “there is a huge opportunity from the merger”, but Tesco has faced criticism from investors over the move, with some shareholders branding the takeover tilt a “distraction” and urging the grocer to scrap it.

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