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Tesco (TSCO) said this morning it was outperforming a “subdued” UK grocery market, as its first quarter like for like sales rose 0.8% in the UK and Republic of Ireland.

UK sales fell 0.4% to £9bn in the 13 weeks to 25 at constant currency rates, representing like for like growth of 0.4%.

It said that, whilst the overall UK grocery market growth was subdued, its performance represented an outperformance of the market in both sales and volume terms (by 0.2% and 1.3% respectively) as it made further investments in range, price and loyalty as part of its ‘100 Years of Great Value’ campaign.

It delivered a “strong” Easter performance, while fresh food volume outperformance was particularly strong in prepared foods (+2.4%) and bakery and dairy (+1.6%).

UK online grocery sales were up 7% year-on-year, with the proportion of customers choosing to Click & Collect their orders increasing to over 10%. The closure of Tesco Direct in July last year impacted total UK sales growth by 0.8%.

Overall UK figures were boosted by the performance of Booker, which was up 12.4% at constant rates to £1.5bn representing like for like growth of 3.1%.

Tesco said Booker “continues to grow well despite lapping exceptionally strong growth last year”, with customers “responding positively” to the improved offer in fresh food.

Total group revenues were up 0.4% at constant rate to £14bn and 0.2% on a like for like basis.

Sales in Central Europe slumped by 7.9% to £1.3bn and by 4.9% on a like for like basis as declining sales in Poland, including store closures, and cooler weather hit performance.

In Asia, sales increased by 7.3% at actual rates and by 2.6% at constant rates.

CEO Dave Lewis commented: “We have had a strong start to the year, growing ahead of the UK market on both a volume and value basis. Our customer offer is more competitive than ever, with a wider choice of our ‘Exclusively at Tesco’ products now available in more stores, helping to drive more than 10% sales growth across the range.

“Following a particularly good Easter, our ‘100 Years of Great Value’ event in May proved very popular with more than 1.5 million customers benefiting from discounted Clubcard Prices.”

Morning update

Majestic Wine (WINE) has confirmed this morning it is in “advanced discussions” over the sale of Majestic Retail and Commercial businesses, with a deal expected to be concluded over the coming summer months.

The company will instead focus entirely on its online Naked Wines business

CEO Rowan Gormley called this a “pivotal moment” for the business, adding: “We are at a crossroads in the Company’s history.”

“Majestic is a great business, with brilliant people and strong customer loyalty. It is also a much better business than it was four years ago with,” he said.

“However Naked has the greater potential for growth, and will deliver the best results for our shareholders, customers, people and suppliers over time. Although we have several options to realise value from Majestic, the cleanest and best for customers, staff and shareholders currently looks to be an outright sale at this time.

“Majestic Wine started life with a disruptive model that challenged the status quo. Now is the right time to do it again under the Naked brand.”

Majestic said both businesses have good long term potential “but with only finite resources and capital, we are unable to maximise both”.

“It has become clear that we need to focus our energies and capital behind the business with the greater potential for growth and which will in turn deliver the greatest value for shareholders.

“Of the two businesses, Naked operates in much larger and faster growing markets, it has a disruptive model that will benefit from the consumer shift towards online, and we have first mover advantage and a more defendable competitive position.”

If the group is unable to complete the process over the summer, in time for the important Christmas and New Year season, it will continue to run the two businesses independently of each other and look to restart the sales process in 2020.

The news comes as the group reported a 6.3% rise in full year revenues to £506.1m was up 6.3% in the year.

It reported a loss before tax of £8.5m, representing a significant reduction from the £8.3m profit before tax delivered in its previous financial year, reflecting the investment in growth in Naked, weaker retail trading and a non-cash impairment charge relating to the retail store estate of £11.1m.

Naked, which will become the primary focus of the listed group, grew underlying sales by 14.5% in the year with strong growth in each of the Naked markets. In particular, the brand grew by 21% in the key US market “proving that our accelerated investment in customer acquisition is effective”.

Majestic Retail delivered a “solid” performance in a “challenging” environment, with underlying sales growth of 1.5%.

Majestic said the the improvements and growth initiatives it has implemented across its retail estate are showing signs of success, with targeted marketing is delivering year on year customer growth and a growing proportion of sales are now placed online.

Majestic Commercial returned to growth with sales up 1.8% and improved profitability, while Lay & Wheeler is once again contributing to growth with reported sales up 22.7% and significantly improved profitability.

Majestic has suspended its final dividend payment to shareholders, instead it will be replaced with a special dividend equal to the final full-year 2018 payment contingent on completion of Majestic sale.

The group also announced a number of board changes, including a change in chairman.

Greg Hodder will step down as chairman at the conclusion of the AGM in August and will retire from the board six months later after a period of transition. He will be replaced by John Walden, an experienced retail executive across the US and UK markets.

Additionally, Nicholas Devlin will join the board as an executive director in the new position of Group Chief Operating Officer. Devlin has been, and will remain, the President of our US Naked Wines division and is based in California.

Elsewhere, Marks and Spencer (MKS) has announced it has sold 85.1% of its new 325m shares through its rights issue to fund its JV with Ocado.

The 1 for 5 offer to buy shares at 185p was not fully taken up by investors, with underwriters Morgan Stanley, BNP Paribas, HSBC and Shore Capital now tasked with finding subscribers for the remaining 48.3m shares.

If these shares are not taken up by investors, these banks will acquire any remaining shares.

Consumer products group PZ Cussons (PZC) has issued a trading update for the year ended 31 May 2019.

It said full year profit expectations remain in line with the guidance issued at the time of the interim results in January, and reiterated again in the April trading update, with profit before tax and exceptional items for the year expected to be close to £70m.

It said the expected outturn for the year reflects a resilient performance in Europe and Asia driven by product innovation and renovation as well as distribution expansion, and with the group’s beauty division performing particularly well.

Performance in Africa has continued to be “disappointing” as a result of the macro economic situation in Nigeria and the challenging conditions at the port.

Full year results will be released on 23 July 2019.

Meanwhile, chief financial officer Brandon Leigh has resigned and has stepped down from the board with immediate effect.

Caroline Silver, Chair of PZ Cussons, said: “The Board wishes to express its thanks to Brandon for the significant contribution which he has made to PZ Cussons over 22 years with the business. He was appointed to the Board in 2006 and has played a leading role in the Company’s development since that time. We wish him all the very best for the future.”

Pending the appointment of a new CFO, Leigh’s responsibilities will be assumed by Alan Bergin, currently commercial finance director.

On the markets this morning, the FTSE 100 has rebounded 0.2% to 7,385.3pts.

Tesco is down 0.8% to 225.7p on this morning’s update, Majestic is down 6.3% to 298p, M&S is down 2.7% to 213.3p and PZ Cussons is down 3.9% to 194.1p.

Aside from those stocks, fallers include Pets at Home, down 4.1% to 173.6p, Greene King (GNK), down 3.4% to 629.8p and Glanbia (GLB), down 1.4% to €14.49.

Early risers include PayPoint (PAY), up 1.3% to 1,064p, Bakkavor, up 1% to 123.8p and McColl’s (MCLS), up 0.8% to 80.9p.

Yesterday in the City

The FTSE 100 ended the day down 0.4% back to 7,367.6pts yesterday.

Majestic Wine jumped 9.3% yesterday as investors awaited this morning’s annual results and news of its strategic review of its Majestic Wine retail estate.

Reckitt Benckiser (RB) jumped 4.4% to 6,675p as it announced former PepsiCo executive Laxman Narasimhan will succeed Rakesh Kapoor as chief executive.

Other risers yesterday included Science In Sport (SIS), up 3.7% to 55.5p, McBride (MCB), up 1.3% to 85p, Nichols (NICL), up 1.1% to 1,805p and Unilever (ULVR), up 1.1% to 4,972.5p.

Fallers yesterday included British American Tobacco (BATS), which dropped 4.4% back to 2,936p on the back of an underwhelming first half trading update as its market share loss in cigarettes was steeper than had been expected.

Imperial Brands (IMB) also fell 1.7% to 2,203.5p as investors soured on the tobacco market.

Also falling were FeverTree Drinks (FEVR), down 3.8% to 2,568p, C&C Group (CCR), down 3.6% to €3.66, AG Barr (BAG), down 2.3% to 948p and B&M European Value Retail (BME), down 2.1% to 335.4p.

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