Tesco sales set to rise as recovery continues

Tesco is the biggest private sector employer in Scotland.
Tesco is the biggest private sector employer in Scotland.
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Tesco, Britain’s largest supermarket group, is expected to reveal further progress in its sales recovery under chief executive Dave Lewis this week – its seventh successive quarter of growth.

City food retailing analysts believe Lewis will unveil like-for-like sales growth of 2.5 per cent in its second quarter, up from 2.3 per cent in the previous quarter.

Broker Bernstein predicts same-floorspace sales growth could even have hit 3.1 per cent in Q2. Recent industry figures from Kantar Worldpanel showed Tesco’s sales rose 2.7 per cent in the 12 weeks to 10 September, although it saw its market share squeezed 0.3 percentage points to 27.8 per cent.

Broker Jefferies is forecasting group underlying six-monthly earnings to have risen 16 per cent to £452 million in the UK and Ireland business. It is also expecting group-wide underlying pre-tax profits to be up 36 per cent to £477m.

The City believes sales will have been supported by rising prices, with Kantar saying like-for-like grocery inflation now stands at 3.2 per cent.

Retail analyst Bruno Monteyne at Bernstein said Tesco’s value Farm Brands ranges had been helping lead a fightback against the discounters Aldi and Lidi, which in recent years have been making steady incursions into the UK food retailing market. Together, the discounters’ market share is now more than 10 per cent.

Monteyne said the success of Tesco’s bounceback was highlighted in Aldi’s latest set of results last Monday, which revealed profits slipping by 17 per cent in 2016. The discounter also did not reveal any like-for-like sales figures in its results.

Monteyne said: “The profit drop reflects the success Tesco has had, in particular with Farm Brands during 2016. This has put pressure on pricing in Aldi’s core product range and encouraged customers back to Tesco.”

This Wednesday’s results come as Tesco – Scotland’s biggest private sector employer – awaits the results of a regulatory investigation into its planned £3.7 billion takeover of wholesale giant and convenience store group Booker.

Provisional findings are due from the Competition and Markets Authority this month and a final decision in December.

Tesco says that it has been working with suppliers to protect customers from inflationary pressures, and said shoppers will see further price cuts that will be concentrated on fresh food and healthy products.

The group has also been cutting costs in line with rivals to help protect its profit margins amid the stiff competition in the sector.

Tesco has announced that it is axing 1,200 roles at its head office in Welwyn Garden City, and shutting its call centre in Cardiff with the loss of 1,100 jobs as part of the efficiency drive.