Tesco sales pick up after revamp

There were signs that Tesco's recovery plan was beginning to gain traction today after industry figures indicated an improving performance.

Britain's biggest grocer saw its market share slip slightly to 30.9% in the 12 weeks to August 5, researcher Kantar Worldpanel said, but its sales growth of 3.4% was significantly higher than the 0.7% a month ago, suggesting it is now starting to close the gap on its rivals.

Tesco's sales have come under pressure in recent months, leading to its first profits warning in 20 years, but chief executive Philip Clarke unveiled a fightback, including pumping £1 billion into the UK business, with extra staff, revamped stores and more special offers.

Meanwhile, the overall grocery market saw sales grow by 3.9%, up from 2.1% a month earlier, as it benefited after price inflation fell to 3.2% - its lowest for 18 months - and a possible boost from the Olympics.

However, Tesco continued to come under pressure from buoyant rivals, with Asda and Sainsbury's showing growth of 6.2% and 4.6% respectively.

Of the 'big four' supermarkets, Morrisons put in the weakest performance, with a sales increase of just 1.8%.

But the discount supermarkets continued to thrive, with Aldi seeing growth of 26% and Iceland up 7%, boosted by a strong frozen foods market.

Kantar's survey of grocery price inflation shows a fall from its peak of 6.2% in November to 3.2%, partly reflecting falling milk prices, boosting consumers' spending power.

Fraser McKevitt, retail analyst at Kantar Worldpanel, said: "It's too early to attribute improved grocery sales to the Olympics, however, the increased market growth rate coincides with the opening week of London 2012 and the better weather in July.

"Shoppers might not yet notice it at the tills, but they are starting to benefit from lower grocery inflation, with prices now rising at 3.2% - the slowest rate for 18 months and a sign that things are starting to look up."

But despite the easing in food price inflation, shoppers were still seeking out economy products, with the lowest priced own-branded lines, such as Tesco Everyday Value, growing at 13%, while premium own label sales are falling by 4% year-on-year, he added.

PA