Manufacturing & Supply Chain

Due to lower prices and more staff, Tesco achieved better than expected results over the key Christmas period, suggesting the supermarket chain may finally be recovering from several years of turmoil.

Tesco said it grew sales in the 19 weeks to January 9, the first increase in over four years. The company has been wrong-footed by the seismic changes in the industry caused by the advance of discount groups Aldi and Lidl.

“There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year,” the company’s chief executive Dave Lewis said.

The firm said sales at UK stores open over a year rose 1.3% in the six weeks to January 9, compared with analyst forecasts of a fall of 1-3%.

Lower prices, 4,000 additional staff and a strong offering over Christmas meant volumes rose by 3.5% and transactions by 3.4% as more customers chose to shop more regularly at the supermarket which had previously dominated the British high street for decades.

Tesco also said its like-for-like sales performance in Ireland turned positive over the Christmas period to 2.9% after an improving trend in sales and volume through the course of the year.

“We have seen a strong customer response to the investments we have been making in our offer throughout the year, particularly in moving to lower, more stable prices on hundreds of key lines,” the company added.

The group had reported one of the biggest losses in British corporate history last April and admitted manipulating its accounts.  It said today it had also seen improvements across the board – from its largest stores and smallest, and both home and abroad.

The result, following a strong update from the second-biggest supermarket Sainsbury’s and smaller rival Morrisons, suggests the industry is finally to getting to grips with the changes in the sector.

The “big four” UK supermarket groups, which includes Wal-Mart’s Asda, have been hit by a shift away from big weekly food shopping trips towards more frequent spending, either at convenience stores, online or at discounters.

For Tesco those changes came at a time when it was distracted by an ill-fated expansion abroad, meaning it took too long to react. Under boss Lewis the firm has spent heavily to cut costs and improve the look of its stores. Analysts welcomed the news but said the group needed to now show it could translate the stronger trading into improved profitability.

Tesco also provided an update on its trading for the 13 weeks to November 28, its fiscal third quarter, where like-for-like sales in its home market fell 1.5%, better than expected but a slowdown from the 1% drop from the second quarter.

Tesco’s share price hit an 18-year low last month as investors fretted over the pace of progress under Lewis but they had edged up in recent days as industry data suggested it may have enjoyed a stronger Christmas period.

Tesco was founded in 1919 and is a British multinational grocery and general merchandise retailer headquartered in Cheshunt,UK.  It is the third largest retailer in the world measured by profits and second-largest retailer in the world measured by revenues. It has stores in 12 countries across Asia and Europe and is the grocery market leader in the UK (where it has a market share of around 28.4%), Ireland, Hungary, Malaysia, and Thailand.