Tesco posts strong UK growth

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Tesco REUTERS Branding for a Tesco store is seen in west London.

Tesco, the world's third largest retailer, showed that its turnaround plan was starting to work as it posted its highest sales growth in three years over the highly competitive Christmas period.

Tesco, which also announced the appointment of Chris Bush as managing director to run its key British business, beat forecasts for sales growth in its home market, finally regaining an edge after a terrible performance last Christmas prompted the firm's first profit warning in 20 years and a strategic re-think.

Sales at British stores open over a year, excluding fuel and VAT sales tax, were up 1.8 percent in the six weeks to Jan. 5, part of its fiscal fourth quarter, compared with analysts' forecasts in a range of up 0.5-1.5 percent and a third quarter fall of 0.6 percent.

“I am pleased with our performance over the important Christmas and New Year period in the UK, which reflects the progress we are making in improving our offer for customers,” said Group CEO Philip Clarke.

“This performance was driven by a further improvement in our food business in-store and a strong contribution from online.”

The firm benefited from easy comparative numbers and the impact of its 1 billion pounds ($1.60 billion) investment plan.

In the same six week period of Tesco's last financial year like-for-like sales had fallen 2.3 percent.

Clarke also announced that Bush, currently chief operating officer in Britain, would step up to run the British business. Clarke had taken control of the market, which contributes about two thirds of group trading profit, when previous boss Richard Brasher departed due to the poor performance.

Many British retailers are finding the going tough as consumers, whose spending generates about two thirds of the nation's gross domestic product, fret over job security and a squeeze on incomes.

With consumer price inflation running at 2.7 percent, Tesco is still seeing negative real growth in the UK, as are its grocery rivals in the so called “big four” - No. 2 player Wal-Mart's Asda, No. 3 J Sainsbury and No. 4 Wm Morrison.

On Wednesday Sainsbury posted a 0.9 percent rise in revenue, excluding fuel and new stores, for the 14 weeks to Jan. 5, while on Monday Morrisons reported a 2.5 percent fall, excluding fuel and VAT sales tax, for the six weeks to Dec. 30. Asda is not due to report until February.

Industry data on Tuesday showed Sainsbury's posted the highest sales growth of the “big four” in the 12 weeks to Dec. 23 and was the only one to raise its market share.

The data showed Tesco's sales growth was the second highest among the big four and also highlighted much stronger growth at the discount end of the market, led by Aldi and Lidl, and at the premium end at John Lewis's Waitrose.

Tesco said group sales rose 3.9 percent excluding petrol.

It said its full-year outlook for Britain was unchanged and it expected tough conditions for consumers in Central Europe to persist. - Reuters


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