The retail giant confirmed its pre-eminence by posting a sales increase of 11.8% for the third quarter, up from 10.3% last year. That’s a remarkable jump for a company of Tesco’s size, particularly since it’s operating in a saturated home market.
However, today’s figures show that international revenues are becoming Tesco’s biggest growth driver – explaining why Sir Terry is so keen to crack the US. Overseas sales were up 25.7%, thanks largely to a 29% increase in Asian revenues. It now plans to open another 7m sq ft of retail space overseas this year, with a particular focus on the US – as we wrote yesterday, Tesco hopes its Fresh & Easy concept could eventually become a 1000-store chain.
Growth in its core UK business, which accounts for about three-quarters of its revenues, was slightly less stellar but still striking. Sales were up by 7.6%, thanks partly to a raft of new retail space and the strong performance of its various online operations. Like-for-like sales were up 4.1%, which is lower than last year’s figure of 5.6% - the drop has attracted some negative comment from analysts, but frankly, this seems a bit churlish in light of the overall picture.
Tesco was also quick to play down fears that prices were spiralling out of control – another factor that could discourage customer spending. It said today that price inflation was about 0.8% last quarter, the same as in the first half of the year, despite the higher cost of commodities and fresh food.
Sir Terry was typically effusive about the results today: ‘We've maintained pleasing progress during the third quarter across the group’, he gushed. With some analysts predicting that its profits could break £3bn this year, you’d think he’d be more cheerful.
Clearly the environment is still tough for most UK retailers. According to the British Retail Consortium today, total sales were up 1.2% year-on-year in November, an increase on October’s 1% gain but still well below the average for both 2006 and 2007. So pre-Christmas sales are picking up slightly, but still have a long way to go.
Tesco’s UK sales might not have jumped as much as last year, but there are an awful lot of retailers who would be delighted with a 4% sales increase at the moment…