26th Jun 2015 07:57
LONDON (Alliance News) - Tesco PLC Friday reported another decline in like-for-like sales in the first quarter of its financial year, as the grocer tries to pick itself up from the difficult year it recently finished and it continues cutting prices in a deflationary UK food market.
But its results were an improvement on the immediately previous quarter and its shares surged following the announcement. Shares in Tesco were trading up 3.5% at 225.31 pence early Friday, the London market's best blue-chip performer.
The UK's largest retailer reported a 1.3% drop in group like-for-like sales excluding fuel in the 13 weeks to May 30, as combined UK and Republic of Ireland like-for-like sales declined 1.5% and international like-for-likes fell 1.0%.
However, this was an improvement on the fourth quarter of the last financial year which saw like-for-like sales fall 1.8% on a group basis, 2.0% in the UK and Ireland and 1.6% internationally. It also was better than first quarter a year earlier, when sales on the same basis fell 3.4% for the group, 4.1% in the UK and Ireland, and 1.7% internationally.
Tesco said that customers are responding well to the investments it is making to prices and its ranges.
Total group sales declined 1.0%, the same decline as in the immediately previous quarter.
Tesco said it rolled out price cuts on over 300 products in the first quarter and has "seen improvements in pricing against all key competitors".
Like the other big four UK supermarkets, who are all battling it out in a price war against the competition presented by the growth of discounters, Tesco is working to "simplify its offer" by getting rid of deals such as '£5 off £40', deals which the discounters don't use. It said it has completed range reviews in fifteen categories, reducing the number of lines by up to 20%.
UK like-for-like volumes were up 1.4% in the quarter, with transactions growing by 1.3% as it took on 180,000 more customers, Tesco said. "This will be a volume-led recovery," Chief Executive Dave Lewis told journalists on Friday, adding that "these are positive early signs".
"We set out to serve our customers a little better every day, and the improvements we are making are starting to have an effect. We are fixing the fundamentals of shopping to win back customers and relying less on short-term couponing. Customers are experiencing better service, better availability and lower, more stable prices and are buying more things, more often, at Tesco," Lewis said in the company's statement.
"Whilst the market is still challenging and volatility is likely to remain a feature of short-term performance, these first quarter results represent another step in the right direction," he added.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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