TESCO’S recovery under chief executive Dave Lewis has gained momentum as the supermarket giant posted a second consecutive quarter of UK sales growth yesterday for the first time in five years.
City analysts hailed the performance in tough trading conditions, and suggested Britain’s largest food retailer was better placed than rivals to keep the sales impetus going because of its sheer size – with a 28 per cent market share.
It came as Lewis also revealed Tesco has sold its Harris + Hoole coffee chain to Caffe Nero for an undisclosed sum, the latest in a string of disposals as he refocuses the company on its core supermarket business.
Tesco’s like-for-like UK sales in the 13 weeks to 28 May lifted 0.3 per cent, after a 0.9 per cent rise in the previous quarter. Group like-for-like sales, including the international operations, rose 0.9 per cent.
Analysts said Tesco, Sainsbury’s, Asda and Morrisons still faced the severe headwinds of deflation and the market share incursions of discounters Aldi and Lidl, while the launch of Amazon Fresh into the UK sector is set to shake things up further.
John Ibbotson, of Retail Vision, said: “The challenge for Tesco is to keep up the momentum. Amazon Fresh won’t help but Tesco’s vast size is an advantage, as it allows it to keep down prices for longer than its rivals.
“In the current war of attrition, this could prove decisive. Tesco’s rate of growth is paltry compared to yesteryear, and the future promises low profits and slow sales growth.
“But given the huge challenges Tesco is facing, this performance by Dave Lewis has to be applauded.” The Tesco boss said: “We have stabilised the business and started to generate growth. I am confident that the improvements we are making for customers are working.”
The group said in its statement that the launch of seven new fresh food brands in March had helped meet customers’ needs and removed “any reasons for them to shop elsewhere”.
Lewis added: “We are encouraged by the progress we are making. By growing volumes, transforming the way we work together with our suppliers, and further optimising our store operating model we are rebuilding profitability in a sustainable way.
“I am confident that the improvements we are making for customers are working and will create long-term value for our shareholders.”
At the group’s Tesco Bank subsidiary, which has its HQ in Edinburgh, sales were up 3.5 per cent in the quarter on strong lending growth.
Joe Rundle, head of trading at ETX Capital , said: “The Tesco super-tanker is slowly but surely turning around, although it’s not plain sailing just yet.
“Things are looking up for Britain’s biggest retailer and compared to its closest competitor, there is plenty of upside for the stock.”