Tesco Q1: Delivering growth in a subdued market

Date : 13 June 2019

Tesco has reported solid results for the 13 weeks ending 25th May 2019 with strong trading over Easter, through Booker and online as it began celebrating its centenary year.

Key figures

  • Group sales: +0.4% (+0.2% LFL)
  • UK and ROI total sales: +1.3% (+1.3% LFL)
  • UK -0.4% total sales (+0.4% LFL)
  • Central Europe -7.9% (-4.9% LFL)
  • Asia +2.6% (+0.1% LFL)

2019 off to a good start

Tesco growth has slowed from its full year 2018/19 results when group LFL increased +1.4%, with Tesco UK achieving at +1.7% LFL and Booker +11.1%. However, the Q1 numbers are broadly in line with expectations given the current negative shopper sentiment and +2.1% LFL comparative from a year ago which was boosted by warmer than ususal weather.

Chief executive Dave Lewis has said;

"We have had a strong start to the year, growing ahead of the UK market on both a volume and value basis. 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. Following a particularly good Easter, our '100 Years of Great Value' event in May proved very popular with more than 1.5 m customers benefitting from discounted Clubcard Prices."

Booker boosts results

Booker remains an important driver behind the growth, with sales up 12.4% (+3.1% LFL) to £1.5bn. Tesco has reported shoppers are responding well to the benefits of  'Joining Forces' and the improvement in the fresh food offer. 100 new lines have recently been added including fresh flowers and drinks.

Ireland performs ahead of UK

In Ireland total sales rose 2.7% (+1.3% LFL) with growth strongest from the chilled and grocery categories. The retailer also saw a positive impact from the increased marketing on 'you won't pay more' campaign. 

Weather slows growth

Tesco had a strong Easter across all formats. This included the biggest ever sales day for small stores on Easter Sunday. Core food performed well thpugh weather dependent categories such as clothing and gardening furniture struggled. This was a big change from last year when warmer weather drove sales. Q1 last year also saw the build up to the World Cup and a royal wedding, creating new reasons to shop. 

Exclusively at Tesco

Due to investment in 'Exclusively at Tesco' there was an uplift of +10% sales, helped by an increase in the range, to around 430 SKUs. Tesco has reported a very positive reaction to this expansion and estimates 84% of all baskets now include at least one 'Exclusively at Tesco' product.

Surge in online grocery

Online grocery sales were up 7% year-on-year in this quarter, far ahead of the 2.8% achieved in 2018/19. Click and collect performed well, with orders increasing 10%. The retailer has made positive changes to its operations which have had good customer feedback.

Mixed performance in Central Europe

Tesco has seen customer ratings on price satisfaction improving, driven by its 'Star Lines' initiative. However sales are declining in Poland, impacted by store closures and two fewer trading days. This year's significantly cooler weather has also had a negative effect on results.

Religious events drive positive Asia sales

Sales increased by 7.3% in actual rates and 2.6% at constant rates. A stronger customer offer contributed to a better performance across all formats and categories. Thailand performed particularly well with strong growth in the Bangkok area. The Thai new year festival Songkran drove performance as shoppers were very offer focused. Malaysia also performed well, particularly in clothing.

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