Business World

Sunday 26 March 2017

Tesco sales jump as shoppers splurge on ‘finest’

Sarah Shannon

Tesco reported the strongest sales growth in three years, beating analysts’ estimates, as shoppers splurged on its "Finest" range of food and champagne.

Sales at UK stores open at least a year rose 4.9pc, excluding petrol and adjusting for value-added tax, in the six weeks ended January 9, the retailer said today. That exceeded the prior quarter’s 2.8pc gain and the 3pc median estimate of 10 analysts surveyed by Bloomberg.

The Finest range was the “big winner,” Finance Director Laurie McIlwee said on a call to journalists, being included in a quarter of all shopping baskets.

After a year weighed down by the recession, shoppers turned away from budget food and splashed out on luxuries over the holiday, market researcher Taylor Nelson Sofres said in a report yesterday.

“Tesco’s update is mega stonking, beating consensus by a country mile,” said Philip Dorgan, an analyst at Ambrian in London. He has a “buy” recommendation on the shares.

Tesco rose as much as 2.9pc in London trading and was up 6.45 pence, or 1.5pc, to 424.3 pence as of 8:10am. The stock has gained 17pc in six months, compared with J Sainsbury Plc’s 5.2pc gain.

Tesco doubled points on its Clubcard loyalty card and mailed additional vouchers to lure Britons during the festive period, contributing 0.7pc to UK same-store sales growth.

Christmas was “robust” for supermarkets, driven by an increase in promotions, market researcher Nielsen said last week.

Smaller competitor Sainsbury last week reported a 4.2pc increase in same-store revenue as it rewarded customers with discount coupons and sold more champagne and seasonal foods. Sales at John Lewis Partnership’s upscale Waitrose chain increased 16pc in the 13 weeks to December 26.

Tesco’s total revenue climbed 7.5pc at constant exchange rates and was driven by higher volumes with “little to no” inflation.

The retailer’s UK market share was 30.5pc in the 12 weeks ended December 27, little changed from 30.4pc a year earlier, Taylor Nelson Sofres said yesterday.

International sales increased 4.1pc as sales in Asia and at the US Fresh & Easy chain advanced. That was less than the 6.8pc median estimate of eight analysts.

The US had “mid-teen” same-store sales growth, McIlwee said, with “little green shoots” of recovery in coastal areas of California. Conditions in Arizona and Nevada were “very tough,” he said.

Bloomberg

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