Tesco sees rebound in UK sales

Source: FT

By Andrea Felsted, Senior Retail Correspondent

Aug 14th

Tesco has had its first rebound in UK sales since it embarked on a turnround plan after its first profit warning for more than 20 years in January.

According to industry data from Kantar Worldpanel, the consumer research group, Tesco was the fastest growing of the so-called big four supermarkets in the four weeks to August 5.

Tesco increased sales by 5.1 per cent over the period, ahead of the total grocery market at 4.2 per cent, while its market share rose from 31 per cent to 31.4 per cent.

The resurgence will be a boost for Tesco chief executive Philip Clarke, who has been revamping product ranges and trying to make Tesco stores more appealing to customers, after Britain's biggest retailer posted its worst trading for decades over the crucial Christmas and new year period.

In the 12 weeks to August 5, Tesco's market share still fell from 31 per cent to 30.9 per cent.

Fraser McKevitt, retail analyst at Kantar Worldpanel, said Tesco had been losing share for more than a year.

"If the current trends continue, it looks like Tesco's share may stabilise at some point in the next few weeks," he said.

However, analysts and retailers said Tesco had been promoting aggressively over the past four weeks. It embarked on an innovative promotional strategy late last month, where customers who spent £48 on five key brands between July 23 and August 1 could gain 50p off of a litre of fuel. It also ran a £5 off a £40 shop voucher campaign during the period, and has been offering promotions on branded goods.

Dave McCarthy, analyst at Investec Securities, said: "Tesco's sales have clearly picked up in the last few weeks, helped by extensive promotions and vouchers. Effectively, Tesco has been buying sales. While any recovery must start with sales growth in the first instance, Tesco has to prove that these sales gains are sustainable and can generate profits."

In the four weeks to August 5, Asda increased sales by 4.9 per cent. J Sainsbury's sales growth slowed to 2.7 per cent, while Wm Morrison expanded sales by 1.4 per cent.

Some analysts suggested that Tesco's aggressive promotions, which are taking place in an already competitive market, were beginning to put pressure on rival supermarkets.

A better performance for Tesco UK will come as a relief for Mr Clarke, who is facing difficulties in the group's international operations. Sales growth has slowed at Fresh & Easy, Tesco's lossmaking US business, while in Korea, one of Tesco's most successful international markets, it faces restrictions on opening hours.

Shares in Tesco rose 5.9p to 335p