Tesco reports ‘continued positive momentum’

Tesco is now Ireland's numer one supermarket brand
Tesco is now Ireland's numer one supermarket brand

Latest results reveal encouraging news for Tesco

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29 June 2016 | 0

Tesco has released its First Quarter Trading Statement 2016/17, with positive results for the Republic of Ireland (which can be viewed in the table below) where like-for-like sales are up by 0.3%.

Tesco CEO Dave Clarke attributed this growth to the fact that in both the UK and internationally, the retailer is “re-configuring our business” to serve customers better. New fresh food brands are also performing strongly, with over two-thirds of customers having bought products from the new range.

“We are encouraged by the progress we are making,” Clarke added. “By growing volumes, transforming the way we work together with our suppliers, and further optimising our store operating model, we are rebuilding profitability in a sustainable way.”

Better brand proposition

Tesco also said it is continuing to reinforce its brand proposition by giving customers lower, more stable prices. Underpinned by Brand Guarantee, and including the investment in its fresh food brands, Tesco says the cost of a weekly shop is now 6% lower than it was in September 2014. The retailer claims it has continued to redirect coupon spend into lowering shelf-edge prices and is focusing promotional spend on the lines that matter most to customers. Tesco’s spend on couponing and number of products on multi-buy promotions in the quarter, were down by 38% and 42% respectively year-on-year.

The group also reported availability continues at record levels, following the reduction of 18% of SKUs in its range resets which concluded in February.

Showing how far Tesco has come

David Gray, senior retail analyst at Planet Retail, believes the results reflect positively on Tesco, commenting: “As expected, Tesco has reported another domestic like-for-like increase driven by some decent volume growth across the core food business. This is encouraging news, considering Tesco has been putting major efforts into improving the proposition through range enhancements, price investments and store refreshes (where it is taking a more mission-based approach to store layout). Upward-facing like-for-likes also come at a time when deflation is still an issue for the wider industry, showing just how far Tesco has come.

“That said, Asda’s decision to focus squarely on market share rather than profitability as a performance indicator could entail some headwinds for Britain’s biggest grocer, although, given its present woes, it’ll undoubtedly take some time for Asda to return to full strength.

Turkish business off-loaded

“The big story of the quarter is that Tesco is now free of the shackles of the failing Turkish business – an operation which, for years, has been a drain on vital group cash and management resources. The disposal will liberate resources to sustain focus on domestic improvements. However, this exit, alongside Korea, does leave Thailand and Malaysia looking increasingly isolated among Tesco’s portfolio. The latter has limited growth potential due to restrictive regulation. Therefore, longer term we still see some scope for further international rationalisation.”

Goodbye to 24 hour opening in many stores

Hannah Maundrell, editor in chief at www.money.co.uk, also said the news boded well for Dave Clarke. “It’s clear the new Tesco boss means business and he has been bold in his decisions,” Maudrell said. “Tesco seem to have finally identified what keeps its customers happy and we’ve waved goodbye to 24 hour opening in many stores and fringe businesses like Dobbies and Giraffe as a result. The series of brave moves are paying off and the focus is rightly on lowering prices and introducing more choice.

However, she added: “It’s disappointing Tesco has yet to sign the NFU fruit and veg pledge – they ought to lead by example and be the first of the biggest chains to do so. Tesco’s image has suffered over the past few years and this could take them one step closer to getting shoppers to view the brand more ethically. If Aldi and Lidl can give farmers a fair deal and keep prices low for customers, surely Tesco can too.”

Like-for-like sales performance

1Q
2015/16
2Q
2015/16
3Q
2015/16
4Q
2015/16
1Q
2016/17
UK & ROI (1.5)% (1.0)% (1.5)% 0.9% 0.3%
UK (1.3)% (1.0)% (1.5)% 0.9% 0.3%
ROI (4.4)% (2.9)% (1.2)% 1.0% 0.3%
International (0.7)% 1.9% 2.7% 3.8% 3.0%
Europe 1.5% 3.5% 3.0% 4.1% 2.8%
Asia (3.4)% 0.1% 2.4% 3.5% 3.3%
Group (1.3)% (0.4)% (0.6)% 1.5% 0.9%

 

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