Tesco battles back against the cold to report sales rise
Wednesday 08 December 2010
Tesco revealed the unprecedented steps it has taken to combat the recent snow yesterday, as a strong international performance by the grocery giant more than offset subdued sales growth in the UK in its third quarter.
Tesco has invested £1.3m in its winter operation, which includes 3,000 tonnes of grit and salt – 50 per cent more than last year – and its purchase of 150 Honda quad bikes to clear the snow in its store car parks more quickly. Laurie McIlwee, Tesco's group finance director, said: "We have been running our supply chain three hours earlier to compensate for longer journeys." He added that the company viewed the icy conditions as an opportunity to deliver a "competitive advantage".
Tesco, which has operations in 14 countries, played down the overall impact of the snow, stressing that only one UK store – in Scunthorpe, where the part of the roof collapsed last week under the weight of snow – had closed and remained so.
The UK's dreadful weather came after the end of Tesco's latest quarter to 27 November during which it grew group sales by 8.8 per cent. The supermarket giant's international sales jumped by 15.7 per cent, driven by Asia where Thailand was the top performer. The world's third-biggest retailer said that sales in Asia soared by 23.4 per cent, boosted by new store openings, such as in China and South Korea.
In the UK, Tesco's total sales growth came in at a less-spectacular 5 per cent over the quarter. Its like-for-like sales, including value-added tax and excluding petrol, only rose by 1.5 per cent. This represented anaemic growth of 0.6 per cent when VAT is excluded.
But Tesco said its performance had "strengthened" at the end of the quarter. Mr McIlwee said: "We will have the best-ever Christmas in the UK."
In addition to all its convenience stores, Tesco will open a record 401 stores on Boxing Day, including every Extra hypermarket and selected Superstores, compared with 257 last year.
Sam Hart, an analyst at Charles Stanley, said: "In the UK, the group is seeing plenty of evidence of recovering consumer confidence, with sales of the premium Finest range up by 20 per cent over a two year period and strong demand for big-ticket non-food items such as Apple iPads and the Microsoft Xbox Kinect games console."
Tesco currently has 300 of its Finest range on promotion, which is up on last year. Elsewhere, the grocer received a fillip from Kantar Worldpanel yesterday. For the first time since May, Kantar said that Tesco grew its grocery market share by 0.1 per cent to 30.7 per cent for the 12 weeks to 28 November.
It said Tesco's sales grew by 4.4 per cent, which was ahead of Asda's 4.2 per cent and Morrisons' 3 per cent, but behind Sainsbury's 6.5 per cent growth.
In the US, Tesco's Fresh & Easy grew sales by 9.8 per cent. Mr McIlwee said: "If we get any tailwinds from the economic environment, we will get an even better performance."
Prices fall in shops
* Shop prices fell in November for the first time in five months, driven by a record level of food promotions and retailers discounting before January sales.
The British Retail Consortium (BRC) and Nielsen survey said the annual rate of overall shop-price inflation fell to 2 per cent last month, down from 2.2 per cent in October. Stephen Robertson, the BRC's director general, said: "38 per cent of fast-moving consumer goods are on some form of offer, which is an all-time high. On non-food goods too, discounts and special offers have started well ahead of the January sales, as the dip in overall shop inflation demonstrates."
Food inflation fell to 4 per cent in November from 4.4 per cent in October, while non-food prices slipped back to 0.9 per cent from 1.1 per cent.
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