14th Jun 2024 11:17
(Alliance News) - Tesco PLC's first quarter trading was better-than-hoped and reflects the grocer's continued dominance of the food retailer sector, analysts on Friday said.
John Moore, senior investment manager at wealth manager RBC Brewin Dolphin, said: "Tesco is a strong business that only appears to be getting stronger".
On Friday, Tesco said it continued to pick up market share and grow volumes leaving the business "well-positioned" for the months ahead.
The grocer said like-for-like sales in the 13 weeks to May 25, the financial first quarter, rose 3.4% to GBP15.31 billion. The UK outperformed with comparable sales up 4.6% to GBP11.4 billion. Booker sales fell 1.3%, Central Europe sales rose 0.6% while in the Republic of Ireland sales climbed 4.4%.
Barclays said sales growth beat its 3.0% forecast. The core UK business beat the broker's 4.0% expectation, Ireland was in line while Central Europe surpassed the negative 0.5% prediction. The sales drop at Booker was slightly worse than Barclays' 1.0% forecast.
"We see this as a very strong start," and a "better start to the year than we had assumed was likely," analysts at Barclays commented.
"While the headlines might not look remarkable, we think this misses the strength of the underlying picture," Barclays added.
Tesco Chief Executive Ken Murphy said: "Following another strong quarter, we're pleased to reiterate our guidance for the full year, with sales trends in line with our expectations and the business well-positioned for the months ahead."
Shares in the Welwyn Garden City-based retailer rose 2.9% to 311.40 pence in London on Friday morning. It was the best performing stock in the FTSE 100 which was down 0.5%.
Murphy highlighted "strong volume growth across the UK, Republic of Ireland and Central Europe supported by easing inflation."
In the UK, Tesco said food sales rose 5.0%, including strong volume growth across the quarter, particularly in fresh food, while non-food sales rose 0.7%, driven by strong growth in clothing.
Tesco said its market share was growing ahead of all key competitors, up 52 basis points to 27.6%, citing data from Kantar.
"We continue to be the cheapest full-line grocer and are the most competitive we've ever been, with our value, product quality and service driving better brand perception and customer satisfaction. Our market share reflects this, growing more than at any other time in the past two years, with customers switching to us from other retailers, shopping with us more often and with more in their baskets," Murphy said.
Richard Hunter, head of markets at interactive investor said the figures confirmed the dominance of the largest UK grocer.
"The group’s overall market share of 27.6% is equivalent to that of its two nearest rivals (Sainsbury PLC and Asda) put together. As such, it is keeping the competition at arm’s length in what is a notoriously ruthless environment," he remarked.
Tesco's ability to lower prices for customers is "enabled by its sheer scale and strength, helped along by falling food inflation and significant cost reductions," Hunter noted.
"In turn, this creates something of a virtuous circle, with more customers attracted by the likes of the group's Aldi Price Match, Low Everyday Prices and Clubcard Prices while at the same time it has also honed its upper end offering, with its Finest range continuing to take market share from its rivals".
By Jeremy Cutler, Alliance News reporter
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