Tesco posts sales boost as ‘momentum is returning’

Tesco reported a 1% rise in sales

Tesco’s “momentum is returning”, according to city analysts, after the supermarket firm posted a seventh consecutive quarter of volume growth in its half-year update today (October 5).

City analyst Shore Capital said Tesco showed improvement in cash sales and it’s “much needed” profit margin. The analyst said it could see the improvement made by Tesco in its numbers and in-store.

Shore Capital said: “The results themselves represent demonstrable operational improvement from the business with cash sales – and not just volumes now positive in the UK in particular – alongside much needed margin accretion. We welcome this progress”

‘We welcome this progress’

“Tesco is also clearly pleased with the performance of farm brands. The self-improvement persists with what management calls ‘range refinement’, improved product adjacencies and a 10% increase in private label in larger stores.”

The supermarket reported a 1% rise in like-for-like sales for the half-year to August 27, including a 0.6% boost to UK sales. While the retailer reported a 28% fall in pre-tax profit to £71M – largely due to one-off costs – Tesco said it was on track to make £1.2bn in its full-year operating profit.

The average customer basket cost 6% less than in September 2014, said Tesco, as prices continue to fall. It revealed a new target for the group’s operating margins to be between 3.5% and 4% by the end of its 2019-2020 financial year – a target Shore Capital said was achievable.

‘Availability and service have never been better’

Tesco chief executive Dave Lewis said: “We have made further strong progress in the first half, with positive like-for-like sales growth across all parts of the group as we re-invest in our customer offer whilst rebuilding profitability in a sustainable way. Prices are more than 6% lower than two years ago, availability and service have never been better and our range is more compelling.

“Our new fresh food brands are performing ahead of expectations, improving our value proposition and further removing reasons for customers to shop elsewhere. Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future.”

Meanwhile, Tesco is facing legal action from a group of investors who said they lost £150M after Tesco’s 2014 accounting irregularities. Three executives were charged with fraud after mis-stating company accounts. The scandal led to the supermarket posting its worst ever pre-tax loss of £6.4bn last year.

 

Tesco first-half results – at a glance
  • Total like-for-like sales up 1%
  • UK like-for-like sales up 0.6%
  • Pre-tax profit down 28% owing to one-off costs
  • Groups operating margins target adjusted to between 3.5% and 4%

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