Tesco reports strongest UK sales growth for seven years

Tough. Challenging. That is how Tesco's chief executive, Dave Lewis, describes the United Kingdom retail market.

This marked the sixth quarter of growth in a row.

"This is a good start to the year, with our sixth consecutive quarter of positive like-for-like sales growth across the Group".

In a trading update for the 13 weeks to 27 May 2017 the company said like-for-like sales were up 1 per cent on the same quarter of 2016/17, with growth of 2.2 per cent in the United Kingdom and Ireland.

The pan-European STOXX 600 index rose 0.5 percent in early trades while Britain's FTSE gained 0.3 percent.

The acceleration in Tesco's United Kingdom sales was mainly driven by fresh food, where the company noted there was "significant market outperformance". Tesco raised prices by 1.5 per centage points less than the 2.9 per cent of the broader industry, Lewis said.

The retailers are battling a rise in inflation, caused in large part by the fall in the pound since last year's vote to leave the European Union, and by a slowdown in wages growth.

A year ago the group briefly fell out with Unilever - the company behind products such as Marmite and PG Tips - over the consumer goods giant's plans to increase prices.

It's imminent deal with Booker was not mentioned in its results, however it will hold its annual general meeting later this month, where shareholders are expected to grill Lewis over the progress of the deal, as well as his recent £142,000 relocation package.

In its trading update, the company said United Kingdom like-for-like sales growth was 2.3% driven by 2.7% like-for-like sales growth in food. "The going is still tough though, as the sector is highly competitive and a rising pound will put pressure on supermarket margins, so it remains to be seen just how much those higher sales will feed through into profits", said Laith Khalaf, senior analyst at Hargreaves Lansdown.

But the data suggested supermarkets are faring better than non-food stores, as households focus on essential purchases - though they face fierce price competition from the likes of Lidl and Aldi.

  • Zachary Reyes