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| Tesco sales rise for the second quarter in a row | Tesco sales rise for the second quarter in a row |
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| Tesco has recorded its second straight quarter of underlying UK sales growth for the first time in more than five years as the supermarket group continued a clearout of peripheral businesses with the sale of the Harris + Hoole coffee chain. | Tesco has recorded its second straight quarter of underlying UK sales growth for the first time in more than five years as the supermarket group continued a clearout of peripheral businesses with the sale of the Harris + Hoole coffee chain. |
| Britain’s biggest supermarket chain said it had agreed to sell Harris + Hoole to Caffe Nero, ending Tesco’s four-year experiment with so-called artisan coffee. Lewis’s predecessor, Philip Clarke, invested in the loss-making chain in 2012 as part of an attempt to attract more shoppers to Tesco’s out of town stores. | Britain’s biggest supermarket chain said it had agreed to sell Harris + Hoole to Caffe Nero, ending Tesco’s four-year experiment with so-called artisan coffee. Lewis’s predecessor, Philip Clarke, invested in the loss-making chain in 2012 as part of an attempt to attract more shoppers to Tesco’s out of town stores. |
| Tesco’s chief executive, Dave Lewis, said the sale of coffee brand was the end of the “second chapter” of his turnaround and it was now “concentrating on improving the performance of the assets it had retained”. “We sit here with no plans on our stocks for asset sales,” he added. | Tesco’s chief executive, Dave Lewis, said the sale of coffee brand was the end of the “second chapter” of his turnaround and it was now “concentrating on improving the performance of the assets it had retained”. “We sit here with no plans on our stocks for asset sales,” he added. |
| The retailer said it had delivered a second quarter of positive like-for-like sales in the UK despite challenging market conditions. Lewis said the upturn was due to lower everyday prices, fewer promotions and improved fresh food products. Sales at UK stores open a year or more rose 0.3% in the three months to 28 May, adding to an increase of 0.9% in the preceding quarter that showed the first signs of revival at Tesco’s ailing British business. | The retailer said it had delivered a second quarter of positive like-for-like sales in the UK despite challenging market conditions. Lewis said the upturn was due to lower everyday prices, fewer promotions and improved fresh food products. Sales at UK stores open a year or more rose 0.3% in the three months to 28 May, adding to an increase of 0.9% in the preceding quarter that showed the first signs of revival at Tesco’s ailing British business. |
| Lewis also revealed that the retailer had been preparing for any economic shock from a possible Brexit. It had not taken a public position on the referendum as it was an “apolitical” organisation. “We have scenario planned a number of different outcomes,” said Lewis, who gave the example that a run on sterling would affect the cost of sourcing in some categories. “There is not a concrete corporate plan covering the eventuality of Brexit ... in all scenarios we don’t see a disproportionate effect on Tesco versus the rest of the market. There has not been a need to do anything pre-emptive.” Lewis does not plan to mount an all-night vigil as the votes are counted but instead intends to “go to sleep early and wake up early”. | |
| Tesco also flagged the contribution of the seven “farm brands” launched earlier this year to its improving sales picture. The new labels, with fictitious names such as Woodside, Willow and Boswell Farms, were created for a new budget range of produce, meat and poultry designed to compete with the discounters. Tesco said shoppers could save £1.60, about 17%, off a basket of 10 items from the range. “We are encouraged by the progress we are making,” said Lewis. | |
| Lewis’s most recent actions have been a series of disposals including last week’s sale of Dobbies, the UK’s second largest garden centre chain, for £217m. It has also recently announced the sale of its loss-making Giraffe restaurant chain and its Turkish retail business, Kipa. It disposed of its South Korean chain for £4bn last September to cut debt. | Lewis’s most recent actions have been a series of disposals including last week’s sale of Dobbies, the UK’s second largest garden centre chain, for £217m. It has also recently announced the sale of its loss-making Giraffe restaurant chain and its Turkish retail business, Kipa. It disposed of its South Korean chain for £4bn last September to cut debt. |
| Tesco’s share price, which was up 2% on the back of the trading update, has drifted down this year as investors worry about Lewis’s ability to rebuild Tesco’s profitability. Tesco eked a pre-tax profit of £162m in the year to 27 February, but four years ago it was making a £4bn annual profit. | Tesco’s share price, which was up 2% on the back of the trading update, has drifted down this year as investors worry about Lewis’s ability to rebuild Tesco’s profitability. Tesco eked a pre-tax profit of £162m in the year to 27 February, but four years ago it was making a £4bn annual profit. |
| Stifel analyst James Collins said the update showed steady progress being made at Tesco but added: “We expect no change to consensus forecasts. We remain of the view that Tesco is doing the right things to rebuild the brand and a sustainable profit base, but that UK margins will take longer to improve than originally hoped. We think the shares fairly reflect this at current levels.” | Stifel analyst James Collins said the update showed steady progress being made at Tesco but added: “We expect no change to consensus forecasts. We remain of the view that Tesco is doing the right things to rebuild the brand and a sustainable profit base, but that UK margins will take longer to improve than originally hoped. We think the shares fairly reflect this at current levels.” |
| Lewis is trying to revive Tesco in a tough grocery market as the discounters Aldi and Lidl continue to win custom and the threat from online grocers grows. Amazon started making fresh food deliveries earlier this month while analysts are worried Asda, the UK’s third largest supermarket, may step up the price war when its new chief executive Sean Clarke, who most recently ran Walmart’s Chinese business, arrives next month. | Lewis is trying to revive Tesco in a tough grocery market as the discounters Aldi and Lidl continue to win custom and the threat from online grocers grows. Amazon started making fresh food deliveries earlier this month while analysts are worried Asda, the UK’s third largest supermarket, may step up the price war when its new chief executive Sean Clarke, who most recently ran Walmart’s Chinese business, arrives next month. |
| Lewis, who was parachuted in as chief executive in September 2014 following the sacking of Clarke, is due to face shareholders at the company’s AGM in London later this morning. | Lewis, who was parachuted in as chief executive in September 2014 following the sacking of Clarke, is due to face shareholders at the company’s AGM in London later this morning. |