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Tesco sales growth slows without hot weather and royal wedding

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Total sales, excluding fuel, rose 0.4% to £13.9bn with like-for-like sales up 0.2% in the 13 weeks to May 25.

Tesco PLC (LON:TSCO) reported a slowdown in first-quarter sales growth due to the absence of hot weather and a royal wedding that boosted last year’s results.

The supermarket chain said total sales, excluding fuel, rose 0.4% to £13.9bn with like-for-like sales up 0.2% in the 13 weeks to May 25.

That compares to last year’s 12.1% increase in total sales and 1.8% rise in like-for-like sales, buoyed by a UK heatwave, the royal wedding of Prince Harry and Meghan Markle and the FA Cup final.

In the first quarter of this year, UK sales dipped 0.4% to £9.1bn and like-for-like sales edged up 0.4% as the company invested in range, price and loyalty programmes to tackle tough competition.

The UK’s biggest supermarket chains have been battling for market share as more customers flock to German discounters Aldi and Lidl.

Tesco chief executive Dave Lewis said the group still managed to grow ahead of the UK market on both volume and value.

“Our customer offer is more competitive than ever, with a wider choice of our 'Exclusively at Tesco' products now available in more stores, helping to drive more than 10% sales growth across the range,” he said.

Mixed sales performance outside of UK

In Tesco’s Republic of Ireland division, total sales increased 2.7% to £567mln and like-for-like sales gained 1.3%.

The Booker business delivered a 12.4% increase in sales to £1.5bn, but this included an additional nine trading days since Tesco completed the acquisition of the wholesaler last March.  On a like-for-like basis Booker sales rose 3.1%.

Central Europe sales dropped 7.9% to £1.3bn and like-for-like sales fell 4.9%, reflecting a decline in Poland and cooler weather across the region.

Asia sales were up 2.6% to £1.2bn with like-for-like sales rising 0.1% as the group increased market share in Thailand.

Banking division struggles

Sales in the banking division dropped 1.9% to £270mln.

Last month Tesco said it was considering selling the banking unit’s mortgage portfolio after coming under pressure from tough market conditions.

Tesco Bank has ceased new mortgage lending while it explores options to sell the portfolio, including the complete transfer of related balances and ongoing administration of relevant accounts.

Source - Proactive Investors

About the author

Philip Scott

Head of Equities, Director

Philip has worked as a Private Client Stockbroker for nearly 20 years, commencing his career in Operations with Rensburg Sheppards (now part of Investec plc) before spending 9 years with Killik & Co advising on and directly managing portfolios. He joined SI Capital in 2006 to head up the Private Client Advisory desk.

Philip is a regular contributor to local media commenting on stock market dynamics and is a Chartered Member of the Chartered Institute for Securities & Investment (MCSI). His RDR qualification gained special recognitionfrom the CISI for achieving the highest combined pass mark in the country for the Investment Advice Diploma in 2012.

“At SI Capital I enjoy being part of a talented team who collectively share the same desire to provide excellence in service.  My focus is to ensure that each client receives effective and optimal management of their assets.”

Philip lives locally, is married with 2 daughters and is an avid sports fan (if now predominantly from the sidelines).  His other interests include music and film.

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