Tesco growth return for first time in over a year

EMBATTLED supermarket chain Tesco received a much-needed shot in the arm yesterday as industry data showed the group has enjoyed its first rise in sales since the start of last year.

Tesco has returned to growth for the first time in more than a year. Picture: PA

Shares in the retailer, which is facing an official investigation into its treatment of suppliers following last year’s £263 million profit over-statement, rose strongly on the back of the latest snapshot of consumer spending habits.

Market researcher Kantar Worldpanel said sales at Tesco edged up 0.3 per cent in the 12 weeks to 1 February, marking the first rise in takings for the chain since January 2014.

Fraser McKevitt, head of retail and consumer insight at Kantar, said efforts by Tesco chief executive Dave Lewis to improve performance had attracted an extra 236,000 shoppers into its stores during the past three months.

“Britain’s largest retailer is bouncing back from a tough year,” McKevitt added.

Despite the increase in sales, Tesco’s market share declined to 29 per cent, from 29.2 per cent a year ago, as the overall grocery sector expanded at the fastest pace since June 2014. Analysts at Shore Capital 
described the return to growth at Tesco as “very good news” for the chain, which has cancelled plans to build eight supermarkets across Scotland as part of a £250m cost-cutting programme.

In a note to clients, the broker said: “It would appear that shoppers are responding to the steps that Dave Lewis has instigated at the group – cleaner stores, better check-out experiences, stronger overall availability and selective but seemingly effective price reductions, including those announced in early January on proprietary brands.”

As well as pledging to lower price on “some of the nation’s favourite brands”, Tesco said last month that it would close 43 loss-making stores, a move that will see the shutters come down on four Scottish branches within the next two months, putting 326 jobs at risk.

The group is to axe a supermarket in Kirkcaldy that employs 189 people, along with a Homeplus household goods store at Fort Kinnaird in Edinburgh, a Metro outlet in Grangemouth and an Express store in Troon.

Shore Capital added: “Tesco still has scope to self-improve and there is much work to be undertaken on category improvement, range reviews and price reductions. Hence, Tesco could yet, against those favourable comparisons, deliver further improvements in sales momentum.

“That Tesco UK is showing positive momentum should be a fillip to management and store staff alike. Equally, in a market that is still far from hunky-dory, Tesco’s improvement will be a cause for concern for its peers.”

The firm’s shares ended the day up 8.45p, or 3.6 per cent, at 241.85p, but rival Sainbury’s fell 2.6p to 265.2p as Kantar’s data showed it had lost its place as the UK’s second-biggest grocer to Asda.

Although sales at Asda fell by 1.7 per cent, its 16.9 per cent share of the overall market came in just ahead of the 16.7 per cent commanded by Sainsbury’s, which saw its takings dip by 1 per cent in the 12 weeks to 1 February.

Shore Capital said: “To be fair to Sainsbury’s, management has guided to an expectation of falling like-for-like sales for the foreseeable future. However, the last three months look like the retailer has seen a deterioration in its performance versus the market.”

Morrisons also suffered a fall in sales, but discounters Aldi and Lidl – along with upmarket grocer Waitrose – all enjoyed strong gains.