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Tesco PLC on Friday backed annual profit guidance after first-quarter top-line growth, though sales in the UK alone fell, despite the supermarket eating up more market share.
Tesco, which has the largest share of the UK market grocery market, said overall sales were just shy of 10% above pre-virus levels. However, it warned on inflation and said it has seen signs that consumer behaviour is changing.
In the first quarter ended May 28, group retail sales amounted to £13.57 billion, up 2.0% yearly on a like-for-like basis. Sales were up 9.9% like-for-like on three years earlier, before the onset of the pandemic.
‘Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market,’ Chief Executive Ken Murphy said.
In the UK alone, sales fell 1.5% yearly on a like-for-like basis to £9.88 billion, but were up 8.1% from pre-virus levels.
In the UK, Tesco's market share advanced by 37 basis points during the quarter, the company said, noting Kantar figures. Tesco said it has outperformed on ‘value and volume’.
‘Our material and ongoing investment in the powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices is removing the need for customers to shop elsewhere,’ Murphy added.
Elsewhere, sales in the Republic of Ireland were 2.4% lower yearly but up 10% on pre-virus times. Wholesaler Booker delivered a 19% annual quarterly sales hike, with sales up 20% on three years earlier. In central Europe, first-quarter sales were up 9.0% on-year and 11% higher versus pre-Covid levels.
Looking ahead, Tesco noted ‘some early indications’ that consumer behaviour is changing due to inflation.
‘Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible,’ Murphy added.
In May, Kantar noted grocery inflation in the 12 weeks to May 15 stood at 5.7%, accelerating from 4.8% in the 12 weeks to April 17. In the final four weeks of the May survey alone, the grocery inflation figure raced to 7.0%, the highest level since May 2009.
Tesco's yearly guidance was left unchanged.
For financial 2023, Tesco is guiding for retail adjusted operating profit between £2.4 billion and £2.6 billion - which would be below the £2.65 billion registered in financial 2022.
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