Tesco says UK sales improving
Tesco, Britain's biggest retailer, today posted a small rise in quarterly underlying sales in its home market after 18 months of decline, indicating changes introduced after a shock January profit warning were starting to make an impact.
The world's third-largest stores group, which makes over 60 per cent of its trading profit in Britain, said sales at UK stores open over a year, excluding fuel and VAT sales tax, were up 0.1 per cent in the 13 weeks to August 25th, its fiscal second quarter.
That compares with analysts average forecast of flat sales and represents a significant improvement on a first-quarter decline of 1.5 per cent.
The company said Ireland was one of "the markets first and most profoundly affected by the financial crisis and subsequent recession".
"Our business there performed well in the first half this year, delivering two successive quarters of positive like-for-like sales growth, albeit profit performance remained subdued," it said.
In April Tesco chief executive Philip Clarke unveiled a plan to invest £1 billion (€1.24 billion) to stem a steady decline in market share to Wal-Mart Stores' Asda, J Sainsbury and Morrisons, as well as discounters Aldi and Lidl.
All that investment was largely responsible for the firm's first fall in profits in nearly two decades.
First half group trading profit fell 10.5 per cent to £1.6 billion, while UK trading profit fell 12.4 per cent to £1.1 billion - both in line with analysts' expectations.
The group has used the money to recruit 8,000 additional permanent staff to give customers better service, devoted more store space to food, given stores a warmer look and feel, revamped food ranges and invested more in lower prices, money-off vouchers and marketing, making better use of customer information gleaned from its Clubcard loyalty scheme.
Tesco has also increased spending on internet and smartphone services, expanded its online range and rolled out its Click & Collect service of buying online for pick up in store.
"I am encouraged by our customers' initial responses to the changes we have made - but there is much more to be done," said chief executive Philip Clarke.
Group sales increased 1.4 per cent to £36 billion.Tesco's problems are not confined to Britain.
Questions remain over its long-term commitment to US chain Fresh & Easy where trading losses narrowed by just £1 million to £72 million.
Also in South Korea, Tesco's biggest overseas market, legislation allowing local governments to impose shorter trading hours is hurting sales. Tesco is paying an interim dividend of 4.63 pence.
Shares in Tesco, down 12 per cent over the last year, closed yesterday at 331 pence, valuing the business at £26.6 billion.
Separately today Sainsbury posted a 1.9 per cent rise in underlying sales for the 16 weeks to September 29th, beating analysts' expectations.