Tesco on the road to recovery with continued sales momentum

Added 23rd June 2016

Evidence of its sustained sales momentum, propelled Tesco’s share price upward by nearly 2.2% to 170p during Thursday morning trading.

Tesco on the road to recovery with continued sales momentum

Tesco reported its group like-for-like sales had grown by 0.9% in the first quarter of 2016, including improvement across the UK and its International divisions. 

This is the British retailer’s second consecutive quarter of growth in what Tesco chief executive Dave Lewis described as a challenging market with sustained deflation. 

While this quarter’s group sales growth wasn’t as high as the 1.5% increase from the previous quarter, Lewis said the results were still confirmation of the success of the company’s new fresh food brand and lower price initiative.

The update confirmed that approximately two thirds of customers have purchased products from the new brands since their launch and that customer satisfaction scores were at their highest level in more than two years.

“By growing volumes, transforming the way we work together with our suppliers, and further optimising our store operating model we are rebuilding profitability in a sustainable way.  I am confident that the improvements we are making for customers are working and will create long-term value for our shareholders," Lewis remarked.

Tesco also announced its proposed disposal of Harris + Hoole to Caffé Nero in Thursday’s update. This pending transaction is yet another part of the company’s plan to place a greater focus on its UK core business, Lewis said.

According to Graham Spooner, investment research analyst at The Share Centre: “The sale is another sign that Tesco is streamlining and restructuring its business. Investors will be aware that it recently announced that it is off-loading Dobbies at a profit as well as The Turkish Kipa stores and Giraffe Restaurants. The move indicates that the company is improving its focus on its core UK business and its customers to help it fight back against Lidl, Aldi and other established names.” 

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