Philip Clarke admits ‘still more to do’ after Tesco returns to growth

Strong growth figures for Tesco helped calm fears over profit warning. Picture: Getty
Strong growth figures for Tesco helped calm fears over profit warning. Picture: Getty
Share this article
Have your say

SUPERMARKET giant Tesco posted its strongest sales growth in three years today, helping to defuse the extended fallout from its first profits warning in 20 years last January.

That warning sparked a £1 billion turnaround programme for its key home market led by Tesco group chief executive Philip Clarke, including store refurbishments, extra staff, and a refreshed food offering.

The result was a 1.8 per cent rise in like-for-like sales in the six weeks to 5 January, ahead of City forecasts ranging from 0.5 to 1.5 per cent.

It came as the group also announced yesterday the appointment of Chris Bush, a Tesco lifer and currently chief operating officer, as managing director to run its British arm. Clarke had taken direct control of the UK business in March after ousting Richard Brasher.

Clarke said yesterday: “Whilst our seasonal performance is encouraging, there is a lot more to do.” On Bush’s

appointment, Clarke said he would stay close to the British division, but his main focus now would be on “vision and strategy”.

Tesco has out-performed two of its biggest rivals, with Sainsbury’s recording a 0.9 per cent same-floorspace sales rise and Morrisons a 2.5 per cent slide.

Tesco, which has a dominant 30-plus per cent market share, declined later yesterday to respond to allegations apparently leaked to City retail analysts by a Sainsbury’s executive that its rival’s 1.8 per cent headline sales rise was flattered by including sales using Clubcard.

Sainsbury’s said that contravened accountancy rules, and its own sales growth figure would have been higher, at 1.4 per cent, if it had done the same for its Nectar loyalty scheme.

Shares in Tesco’s closed up 6.3p at 355.4p. The City praised the latest trading performance, but said it was flattered by exceptionally poor comparators the previous year.

“They’ve really done well in the UK, showing the strongest evidence to date that they’re regrouping,” said Clive Black, at broker Shore Capital. “The momentum is now more up than down.”

One top-20 investor in the group said: “The expression ‘one swallow doesn’t make a summer’ comes to mind. The comparisons are flattering ... and there are still plenty of structural issues to resolve.

“Have you been in a Tesco store recently and noticed a difference in the offering? Because I haven’t.”

The latest out-turn was driven by a stronger food performance and an 18 per cent rise in online sales – internet sales being a strong feature in virtually the whole high street in the festive period. Sainsbury’s online sales lifted 15 per cent, while Morrisons boss Dalton Philips partly blamed his group’s lacklustre performance on the lack of a food online offering.

Tesco also said yesterday that Benny Higgins, head of Tesco Bank, whose HQ is in Scotland, has been promoted to the executive committee of the company, which sets strategy.

Marks & Spencer shares closed down 2.2p at 368.8p after lingering adverse reaction to its Christmas figures released late on Wednesday. They showed clothing, footwear and homewares sales down 3.8 per cent, while food sales rose just 0.3 per cent.