Solid start in tough times at stores

Jun 17 2009 by Iain Laing, The Journal

TESCO has said first-quarter sales rose 4.3% in a solid start to its trading year.

The group said the UK same-store sales increase, excluding VAT and fuel, had been achieved with a return to growth in non-food sales.

But its result for the 13 weeks to May 30 lags behind that of its resurgent competitor Morrisons, which recently reported first-quarter sales up 7.3% .

Tesco said non-food business had resumed modest growth, driven partly by its recent Clubcard relaunch. It saw good growth in electricals, homewares, stationery, gardening and toys.

Its push further into personal finance has also begun in earnest with six new in-store banking and insurance centres opened so far.

Tesco reported steady growth in customer accounts as its personal finance operation continues to pick up customers after the banking crisis. The division contributed another 2.2% to total UK sales.

Chief executive Sir Terry Leahy said: “We’ve made a solid start to the financial year, maintaining good momentum in a challenging economic climate.”

Total group sales rose 12.6% excluding fuel, boosted by international sales up more than a fifth, thanks in part to the weak pound.

Excluding exchange rates, sales in its overseas businesses rose 11.4%. Tesco’s update shows improved trading on previous quarters, with sales including VAT rising from 2.7% in the final quarter last year to 3.3%. Finance director Laurie McIlwee noted a pick-up in consumer confidence.

But the group has been losing market share to rivals such as Morrisons and Sainsbury’s, which is due to report today and is expected to announce sales growth of more than 6%.