Category: Food

Tesco’s turnaround appears to have been sealed with the supermarket giant recording its fastest sales growth in three years, industry data has shown.

The UK’s biggest supermarket, which has been gradually returning to health since boss Dave Lewis took the reins in September 2014, grew sales by 2.2pc in the 12 weeks to November 6, according to Kantar Worldpanel’s closely watched snapshot of the grocery sector. The company’s market share rose to 28.2pc, from 27.9pc in the same period a year ago.

Tesco’s own-label lines, including its Finest range, helped entice shoppers, Kantar analyst Fraser McKevitt said. “Much of Tesco’s growth has come from more affluent shoppers returning to the store, and average spend per trip is up by 2.1pc to £20.69,” he added.

The large supermarkets have been hurt in recent years by the rampant growth of the German discounters Aldi and Lidl, which have been opening new stores at a furious pace. However Kantar’s data indicated that these chains were now growing at their slowest rate since 2011. Aldi’s sales rose 10.2pc to a 6.1pc market share, while Lidl was up by 6.1pc to a 4.6pc share.

Of the remaining “big four” supermarkets, Sainsbury’s recorded a 0.7pc sales fall, while Morrisons and Asda were down 2.4pc and 5pc respectively. Morrisons’ figures are skewed by the fact it has closed loss-making stores in the last year, and sold off its M Local convenience store chain, meaning its overall sales will be lower because it has fewer shops.

The grocery market as a whole chalked up 0.8pc growth in the 12 weeks. The sector has been hit by deflation, with prices falling consistently for more than two years as the major stores compete with each other to lure in shoppers. Grocery prices fell 0.5pc during the period, although this was a “significant reduction” on deflation in the summer, Mr McKevitt said. Analysts are predicting that inflation will start to return; the latest figures from the Official for National Statistics put inflation at 0.9pc in October.

“We’re likely to see prices starting to creep up again in December, unless retailers choose Christmas to unleash a new round of price cuts,” Mr McKevitt added. “Although it’s tempting to link any potential price increases to Brexit and the devaluation of sterling, it’s worth remembering that deflation has been easing since December last year, well before the referendum.”

Separate numbers from Nielsen appeared to confirm a slowdown in growth for the discount stores. Mike Watkins, Nielsen’s UK head of retailer and business insight, suggested price cuts at the larger grocers were helping them compete with the discounters.

“Shoppers are still spending freely and we’ve seen a return of sustainable growth in the volume of items people are buying, helped by industry-wide price cuts, so one of the discounters’ USPs is less pronounced in shoppers’ minds,” he said.

David McCarthy, an analyst at HSBC, said Tesco’s sales growth in the last quarter was “impressive”, especially since its share of retail space was declining. “Tesco’s growth is at the expense of key competitors who all lost market share. Tesco is well positioned for Christmas, and has entered the season with growing momentum,” he said.

Clive Black, of Shore Capital, hailed a “quiet revolution” at Tesco. “We have been arguing for some time that we see improved market dynamics for British supermarkets; volume growth and potentially an easing of deflation,” he said.

Tesco’s shares jumped 3.7pc to £2.13 in morning trade. Sainsbury’s climbed by 2pc and Morrisons rose by 3.8pc.