Tesco records improving picture in UK

Date : 10 January 2013

Tesco has released its Christmas trading results for the six weeks to 5 January, with group sales up 3.9% inc. VAT exc. fuel (3.6% at actual exchange rates). The performance of its UK operation continues to strengthen with performance internationally similar to that experienced in Q3.

Tesco's strongest UK growth for three years

In the UK sales over Christmas increased by 4.3% (inc. VAT, exc. fuel), with LFL sales growing at Tesco's fastest rate for three years, up 1.8% (exc. VAT, exc. fuel). In comparison to its difficult Christmas trading period last year, when LFLs declined 2.3%, a strong turnaround in performance is clearly evident. Tesco attributes much of its success to its plan, put in place last April, to invest £1bn into UK operations. The results of this plan are now coming through with key drivers of growth over Christmas including:

  • Food performed much more strongly than last year and showed continued improvement from Q3

  • Finest and Everyday Value private label outperformed the business, with customers responding well to both the re-launched entry tier range and improved seasonal ranges

  • General merchandise and clothing performed better than in the previous quarter both in-store and online, although general merchandise still dragged on overall performance

  • Strong online food performance with sales up 18%, including over 500k orders in the week before Christmas when 5% of customers chose to use one the 140+ drive-through Click & Collect locations which have been introduced in the last year

  • Tesco Direct sales were up by more than 16%, with Click & Collect for non-food items also proving popular, boosted by the 600+ Express stores to now offer the facility

  • New stores that opened performed well but contributed slightly less to growth than previous years, reflecting Tesco's reduced new space opening programme

New UK Managing Director

Following improving UK performance throughout the 2012/13 financial year, Philip Clarke, who has been conducting both the Group and UK CEO roles since March, has decided to refocus on his group responsibilities, with Chris Bush appointed as the new UK Managing Director. Bush has previously help COO and CEO roles in Tesco's second and third largest markets respectively and more recently has held the role of UK COO. A Tesco lifer, he has over 30 years of experience with the company. To learn more about Chris Bush and our assessment of his immediate priorities - click here.

For information on Tesco's other senior management changes, announced at the same time as the results, please read IGD's article here.

International growth similar to Q3

International performance paints a similar picture to Q3 with sales (exc. fuel) growing at 3.5% at constant rates (2.7% at actual rates). Sales in Asia grew 7.6%, with LFL growth marginally improving due to a stronger performance in Thailand, offsetting sales lost from enforced store closures in Korea. Performance in Europe continues to be impacted by reduced consumer spending, with sales declining 0.6% and LFL sales growth at a similar level to Q3, when it was recorded at -3.6%. In the US, following the announcement of a strategic review of its Fresh & Easy business in December 2012, sales growth continued to slow with growth recorded at 4.1%.

Nine months into implementing the six-part plan but a lot more still to do...

Commenting on the Christmas trading period, Philip Clarke, said,'The Group performed broadly in-line with our expectations through the Christmas period, with an improved performance in the UK and maintained trends elsewhere as we continue to experience tough trading conditions - particularly in Central Europe. 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. This performance was driven by a further improvement in our food business in-store and a strong contribution from online, which included our biggest ever week for internet sales, a successful first Christmas for Grocery Click & Collect and a better performance for Tesco Direct, our online general merchandise business. We are just nine months into the implementation of our six-part plan, which is about Building a Better Tesco in the UK for the long-term. Whilst our seasonal performance is encouraging, there is a lot more to do and the team is focused on delivering further improvements for customers in 2013.'

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