Tesco creates 20,000 jobs as lead over Sainsbury's grows

TESCO SHOWED that it is extending its lead over its struggling rival Sainsbury's yesterday, when it reported strong trading figures and confirmed plans to create 20,000 jobs worldwide this year.

Announcing a "solid start to the year" John Gardiner, the Tesco chairman, told shareholders at the company's annual meeting that underlying sales in the three months to the end of May were up by 3.7 per cent on the same period last year.

This is better than the industry average and significantly ahead of Sainsbury's sales growth. In a poor set of results earlier this week Sainsbury's indicated that its underlying sales are at best flat on last year and possibly lower.

One analyst said: "The gap between Tesco and Sainsbury's is enormous and widening."

The analyst said that Tesco was well placed to take advantage of the distractions of its rivals. Sainsbury's is starting on a full-scale makeover that will include a new corporate image and cost-cutting exercise. Asda is embroiled in its merger with Kingfisher, while Safeway is struggling. "It all leaves the way clear for Tesco to power ahead," the analyst said.

Tesco has 15.7 per cent of the UK's pounds 89bn grocery market, according to figures compiled by the Institute of Grocery Distribution. This compares with just 12.7 per cent held by Sainsbury's.

Analysts point to additional initiatives by Tesco that are expected to push sales still higher. These include a holiday prize promotion and fresh mailshots to members of its ClubCard loyalty scheme.

At its annual meeting yesterday Tesco confirmed its plan to create 10,000 jobs in the UK this year. These will mainly be in 26 new stores and in other outlets that are being extended, while 20 per cent will be in its home shopping service which is being expanded.

The group is also creating a further 10,000 jobs outside Britain. Thirteen new stores will be opened in Tesco's central European operations in Hungary and the Czech Republic as well as in South-East Asia.

Analysts are forecasting that Tesco will make full-year profits of pounds 940m this year. This compares with just pounds 730m for Sainsbury's.

The expansion plan is in stark contrast to Sainsbury's, which has announced 1,600 job cuts in the last few weeks. The company is opening new stores but they will be smaller than the group's average size and in total will add only half the new space that Tesco will open this year. Tesco shares closed 1.5p higher at 185.25p.

Elsewhere in the sector Waitrose, part of the John Lewis Partnership, announced a 22 per cent increase in sales in the week to 19 May.

The figures were well ahead of the group's estimates and helped by the late Bank Holiday in May and good weather, which helped sales of salads, fruits and chilled ranges. At the company's department stores sales were up by 5 per cent in the same week last year, helped by strong fashion sales.