Tesco defies recession with fastest sales growth in years

Simon English
16 Jun 2009

Tesco's UK sales are growing at the fastest pace for two years as the supermarket behemoth shrugs off the recession.

The company now looks ready to move back ahead of rivals after a period when it seemed to be falling behind Asda and others.

Today it said that sales in the last three months rose 4.3%, up from 3.7% in the previous quarter.
That is still well behind the 7% that J Sainsbury is expected to unveil tomorrow but analysts say the gap is closing rapidly.

Clive Black at Shore Capital said: “It's an encouraging statement. Tesco is a growth company.” The shares rose 8.5p to 364.6p. The chain also reported that sales of its high-quality food range, Finest, are growing again, suggesting that the recession is truly over.

Finance director Laurie McIlwee was reluctant to call an end of the downturn, however.

“I think it is too early to call any signs of recovery. The upper market brands such as Finest are starting to do well but there's still downtrading happening in our business,” he said.

“We are still planning on a tough year.”

Tesco claims it has been discounting heavily — perhaps to counter the threat from Aldi and Lidl — a strategy which has hit sales performance in the short term but which should ensure customer loyalty over a longer period.

Across the whole group, sales were up 12.6% — a number “that other companies would die for”, according to Tesco's executive director of corporate and legal affairs Lucy Neville-Rolfe.
Sales at the Asian business leaped 44%, and at the embyronic US arm rose 174%.

In April Tesco unveiled annual profits of £3 billion. But trading losses at the US business — Fresh & Easy — soared to £142 million from £62 million a year earlier.

Tesco has revamped its US offering to cope with a severe American recession and now insists the business is on track.

The supermarket remains the dominant player in the UK with a market share of more than 30%. Although rivals often claim to be stealing custom from Tesco, industry figures suggest otherwise.

Tesco is also moving into banking to take advantage of the strife in that industry. Some consumer groups worry that the company is simply too powerful and complain that it bullies smaller firms out of business.

Tesco says its growth is entirely a matter of consumer choice. It is creating thousands of jobs this year in its stores.