Tesco hailed a ‘solid start’ to the year, after posting a 4.3% rise in like-for-like UK sales for the first quarter – better than the previous three months, and bang in line with City forecasts. Since the likes of Asda, Morrisons and Sainsbury’s have all posted bigger sales hikes recently, Tesco is being forced to defend itself against claims that it’s being outshone by its rivals. But since overall sales were up nearly 10%, and its market share remains above the 30% mark, Tesco boss Sir Terry Leahy probably isn’t losing too much sleep over it.
Tesco’s overall jump in sales – of 9.7%, or 12.6% including fuel – was partly due to another sterling display from its international division. The 13 countries it operates in outside the UK delivered a 20% increase in sales (with Asia up 43%, thanks largely to the recent acquisition of Homever in Korea), or 11.4% if you strip out the effect of favourable exchange rates. The only downer is the performance of US arm Fresh n’Easy, which continues to be buffeted by the West Coast recession: the division lost £142m last year, although Tesco did say today that its sales were up 174% last quarter (albeit from a low base, presumably).
Still, the retail behemoth also put in an improved showing at home: Sir Terry said the ‘core UK business had delivered solid stable growth’ in a deflating market. Even the non-food business has returned to ‘modest’ growth, which is good news for green shoots fans – Sir Terry suggested a few months back that this would be a sign of imminent recovery. The good weather has helped; apparently toys and gardening equipment have been flying off the shelves.
One area we were keeping an eye out for today was the performance of its Tesco Personal Finance, its new banking arm (which was previously run by RBS). Sure enough, Tesco reported ‘steady growth’ in customer accounts, with six new in-store centres boosting overall sales by 2.2%. The high street banks had better start looking over their shoulders, if they’re not already.
Tesco’s UK sales growth is admittedly lagging behind its rivals – Sainsbury’s is expected to report growth of about 7% tomorrow, while Asda and Morrisons are both running at more than 8%. And it’s clear that Tesco’s aggressive discounting, to ward off low-cost retailers like Aldi, has taken a bite out of top-line sales (and presumably margins). But it reckons that it has stemmed the flow of customers. And it’s pretty hard to look at these results and see a company in trouble; in particular, its personal finance arm could turn out to be a very nice little earner...
In today's bulletin:
Poor old Tesco makes do with 10% jump in sales
350,000 jobs to go in public sector recession?
Long wait for superfast internet
Beware the bargain-basement takeover
No sign of green shoots for owner-managers