TESCO POSTED quarterly sales growth towards the bottom end of forecasts yesterday, held back by a drop in food-price inflation, but said a gradual consumer recovery remained on track.
“We are seeing improving customer confidence and encouraging trends in both the UK and our international businesses, although recessionary conditions still exist in a number of markets,” Tesco chief executive Terry Leahy said yesterday.
The supermarket group, which makes about three-quarters of its profit in Britain, said sales at British stores open at least a year rose 2.8 per cent, excluding petrol and VAT sales tax, in the 13 weeks to November 28th – its fiscal third quarter. That was down from 3.1 per cent in the second quarter.
Richard Hunter, head of UK equities at brokerage Hargreaves Lansdown, said he detected “a tinge of disappointment in this update, set against the high expectations which Tesco attracts”.
Britain is taking longer to emerge from recession than other major economies and a retail survey earlier yesterday signalled only a gradual recovery. The UK government will also need to raise taxes to tackle its huge deficit and is expected to confirm today it is reversing a cut in VAT sales tax introduced last year.
Tesco finance director Laurie McIlwee said he did not expect the reversal to derail recovery, though he warned against raising the rate above its former 17.5 per cent level. “If the VAT goes above that it could be more negative. Just as consumers are getting more confident, to start indirectly taxing people [more] will be a strain on their budgets,” he said.
Tesco, which has more than 4,300 stores in 14 countries, said group sales rose 8.8 per cent excluding petrol, with strong growth in Asia offsetting a flat performance in Europe. That was down from 11.4 per cent in the first half but compared well with international rivals such as Carrefour and Wal-Mart. – (Reuters)
