Tesco has reported encouraging Q1 trading lifted by very positive initial results from newly integrated Booker. Group LFL sales increased by 1.8% in the 13 weeks to May 26th, representing a 10th consecutive quarter of growth.
- UK and ROI sales ahead by 3.5% boosted by 14.3% growth at newly integrated Booker
- UK sales +2.1% down from 2.3% in Q4 but impacted by timing of Easter and weather impact
- Central Europe LFL -1.0% impacted by regulatory challenges
- Asia LFL -9.0% with sales trend improving following withdrawal from bulk selling activities
Resilient performance in the UK
The UK performance was lifted by three major initiatives. During the quarter Tesco forged ahead with the rollout of its own brand renewal programme. 2,850 products have now been relaunched to date, putting the business on track to relaunch the entire 10,000 product range. Within this, Tesco has stepped up price investment in its exclusive fresh food brands and recently begun introducing exclusive value brands into grocery. Another major development in the quarter was the decision to close the Tesco Direct non-food online business after a review concluded it had little chance of becoming profitable. Tesco will instead non-food categories such as toys, cookware and homeware into tesco.com, which experienced a strong quarter with growth in transactions and basket size. Looking ahead, innovation will be an increasing focus for Tesco. The bringing together of product development teams at its new Heart building in Welwyn should drive innovation and boost efficiency.
Strong growth at Booker
Booker's growth of 14.3% (12.4% excluding tobacco) was driven by a strong underlying performance and new business wins. Following encouraging initial results from the pilot Chef Central unit at Bar Hill Extra, Tesco has now opened a second unit in Beckton, East London. Tesco has also rolled out its trial introduction of 30 top selling Booker lines to 50 more Tesco stores. Booker lines are also being introduced into Tesco distribution centres to improve availability, a move that will support the rollout of Booker lines into more Tesco stores.
Underlying progress in central Europe
In Central Europe, sales were impacted by new Sunday trading regulations in Poland and public holidays in Slovakia. However the underlying performance was strong in fresh food and trading improved in Hungary.
Improving performance in Asia
Asian sales improved towards the end of the quarter following the annualisation of the ending of bulk selling activities in April. However the issuance of government welfare cards that cannot be redeemed in modern retail chains and continued price investment by Tesco impacted trading. That said, the pace of sale decline in Asia eased through the period. and fresh food performed strongly with LFL growth of 4.5%.
"Growth plans on track"
Commenting on the results CEO Dave Lewis said "Our growth plans are on track and we are pleased with the momentum in the business. We remain well-placed to serve our customers better and deliver on our medium-term financial ambitions. We are delighted with initial progress on Booker, and are focused on delivering the synergy benefits that our merger brings."