Tesco stocking up on healthy sales growth

Published on Tuesday 10 June 2008 10:22

SUPERMARKET giant Tesco has seen sales and profits continue to grow, despite the current "uncertain" trading environment.

The company has seen UK like-for-like sales increase by 3.5 per cent, excluding petrol, in the 13 weeks to May 24 – in line with management forecasts.

Strong international growth – including through its new stores in the United States – helped overall group sales rise by 13.7 per cent.

Tesco chief executive Terry Leahy said the firm had seen "good growth" in core food categories. He said: "We've made a good start to the financial year thanks to the growing breadth of the group and the strength of the Tesco business model.

"This has been achieved despite the more uncertain economic environment.

"Our international operations continue to grow strongly. We're pushing on well with new store developments in our established markets and our expansion into new markets, including the United States."

He added that the company has "coped well" with the "more cautious mood" of consumers towards non-food spending.

Tesco said that its international operations have been helped in part by favourable exchange rate movements. Total international sales were up 26.6 per cent at actual exchange rates or 13.9 per cent at constant rates.

There was a particularly strong performance in Europe, with sales surging ahead by 32.4 per cent at actual rates, while Asia achieved a 16.7 per cent sales rise for the group.

The company is to continue its international expansion with 9.8 million square feet of selling space due to open, most of which are scheduled to happen in the second half of the current year.

Domestically, Tesco added to recent reports that consumers are avoiding spending on "big ticket" items. It said: "Although food category performance has been good, our rate of growth in non-food has eased as consumers have become more cautious with their spending during recent months.

"Our strong competitive position has meant that our non-food growth has remained significantly stronger than the wider market."

Recent supermarket market share figures have shown customers looking to save on household bills flocking to discount stores such as Lidl and Aldi.

Tesco's finance director Andrew Higginson said discounters were "having a moment in the sun", but added that the grocer's 3.5 per cent same-store sales growth was "by any definition a good number".

He also remained upbeat despite recent gloom in the retail sector. "Employment is still pretty full and at this stage we are seeing consumers prepared to spend where they see value," he said.

Mr Higginson added that it is the "first time in a long time" that non-food sales growth has fallen behind food for the firm.