Tesco shares received a further boost following another “strong” quarterly performance, with investors buoyed by UK market share gains and strengthening volumes.
The UK’s biggest supermarket, updating the market ahead of its AGM, said its food sales were up 5% in the 13 weeks to 25 May, driven by strong volume growth, particularly in fresh food.
Consequently it has grown market share ahead of competitors, up 52bps to 27.6%, underpinned by 15 consecutive periods of switching gains.
Core grocery performance was helped by its claim to be the cheapest of the full-line grocers for 19 consecutive periods, driven by Aldi Price Match on 700 lines, Low Everyday Prices with over 1,000 prices locked, and Clubcard Prices.
The supermarket saw growth in all channels, with online sales up 8.9%, driven by volume growth and strong contribution from Whoosh. Non-food sales also edged up, growing by 0.7% in the period driven by strong growth in clothing.
Overall Tesco UK sales were up 4.6% to £11.4bn, while it was up 4.4% in the Republic of Ireland and 0.6% in central Europe.
One blot was a 1.3% drop in Booker sales to £2.2bn, which it said reflected the continued tobacco market decline and weakness in parts of the fast food market serviced by Best Food Logistics. However, it stressed it posted continued underlying growth in core retail and catering following an “exceptional” performance last year, with core retail up 1% and core catering up 2.2%.
Tesco shares rose 2.6% on the news last Friday to 310.2p, with the shares now up 19% year on year having hit their highest level since 2020 in May.
“Given Tesco is already the leading UK grocery player, it is impressive that the company has been able to gain market share,” commented AJ Bell’s Russ Mould. “It speaks to just how effective initiatives like its Clubcard Prices have been in securing customer loyalty, and is important given the inflationary tailwind which previously boosted sales is starting to ease.”
Bernstein analyst Will Woods noted Tesco’s performance had been “strong across all markets with volume-led growth in spite of tough weather”, adding: “This is a strong and confirmatory set of results from Tesco.”
Eleanor Simpson-Gould, senior retail analyst at GlobalData praised the “commendable positive growth” noting the tough inflation-driven comparatives from 2023. “We expect Tesco’s food division to continue this momentum into Q2 despite an unseasonably cool start to the summer [as it] benefits from volume uplifts in alcohol and party food to celebrate a summer of sports.”
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