Tesco’s UK growth outpace rivals despite squeeze on shoppers’ income

Food prices have been rising due to drop in sterling

Tesco has enjoyed solid growth in the last month. Growth in the broader grocery market slowed due to weak sales of barbecue food and ice cream in cooler summer weather

Tesco has enjoyed solid growth in the last month. Growth in the broader grocery market slowed due to weak sales of barbecue food and ice cream in cooler summer weather

 

Tesco’s sales growth outpaced its main UK rivals in the last month as Britain’s biggest grocer continued its revival in the face of a squeeze on disposable incomes.

Separate reports from researchers Kantar Worldpanel and Nielsen both pointed to a strong month for the market leader, pushing its shares up the most in more than a month.

Tesco sales rose 3 per cent in the 12 weeks ended on August 13th, Kantar said, while Nielsen put the gain at 3.2 per cent. Growth in the broader grocery market slowed due to weak sales of barbecue food and ice cream in cooler summer weather.

“Tesco was the clear winner of the Big Four,” HSBC analyst Dave McCarthy said in a note. “It continues to lengthen its lead and its importance to its supply base.”

Boost

The data provides a boost for Tesco, whose share price has been hit this year by concern that chief executive officer Dave Lewis’s turnaround efforts were faltering. Brexit is also clouding the outlook for the industry. The European Union’s unwillingness to open trade discussions until the UK agrees to other divorce terms increases the chance of grocers paying tariffs on imports from the bloc, when the UK leaves in 2019.

Mr Lewis has been using Tesco’s vast buying power to limit the extent of price rises relative to its rivals, and win over cost conscious shoppers. Food prices have been rising since the final quarter of 2016 as a result of the drop in sterling and higher commodity prices.

Tesco’s shares were up 3.6 per cent at 183.3 pence in London in late-morning trading, the biggest gain in Britain’s benchmark FTSE 100 Index.

Growth

Total UK supermarket sales grew 4 per cent in the month, boosted by continued strong growth at discounters Aldi and Lidl, Kantar Worldpanel said. The defensive nature of the industry has come to the fore in recent months, as a squeeze on disposable incomes has seen fragile demand for fashion and big ticket items weaken.

“All four of Britain’s biggest grocers managed to grow sales for the fifth consecutive period, a run of collective success not seen since 2013,” Fraser McKevitt, head of retailer and consumer insight at Kantar Worldpanel, said in the report.

The industry’s growth was slower than recent periods as temperatures fell below the seasonal average following a June heatwave. Burger sales fell by a quarter while demand for ice cream slipped 9 per cent, Kantar said.

- (Bloomberg)