Tesco Sales Up 11.7% in Q3

By giving customers more affordable choices, they have deflated sales during the quarter by between two and three percentage points. As a result, over 300,000 more customers are shopping with Tesco every week.

03/12/08 Retail giant Tesco has said that group sales for the thirteen weeks ending 22nd November 2008 increased by 11.7%, driven by all five parts of our strategy. Despite the stronger economic headwinds in our major markets, our rapidly expanding international operations have delivered excellent growth, the core UK business has made solid progress and our non-food ranges – helped by Tesco Direct – have performed remarkably well in very subdued conditions.

The company said that retailing services are continuing to attract new customers through a strong pipeline of new products, combined with a growing presence on the internet.

International sales were up 28.1% at actual exchange rates and by 14.6% at constant rates. This included a particularly strong performance in Asia, where sales grew by 29.4%, helped by the Homever acquisition and in spite of the depreciation of the Korean Won against Sterling.

Strong growth was reported in all our European markets, although favourable exchange rate movements have contributed significantly to this – and growth at constant rates slowed to 6%. Despite the economic slowdown in some of our markets, our businesses have done well, particularly in food and grocery categories, and we have seen good market share gains.

Tesco remain on track to deliver a substantial programme of new store openings this year, which will provide around eight million square feet of new selling space in International. Their prudent decision to maintain, rather than accelerate our current rate of new store expansion in the United States (US), given the severity of the economic slowdown in some geographic markets there, will mean that they will open 0.5 million square feet for Fresh & Easy during the second half. Early US stores have now moved strongly into like-for-like growth and the performance of Fresh & Easy overall continues to be pleasing.

The company is making solid progress in the UK in the face of challenging market conditions, particularly in non-food. Total sales grew by 5.9% in the quarter, with like-for-like sales up by 3.2%, including petrol. Excluding petrol, like-for-like sales rose by 2.0%.

Inflation, excluding petrol, reduced substantially in the quarter, and is declining more rapidly in Tesco than in the wider market as we seek to help customers to spend less by reducing prices and making more affordable products available, including through the recent launch of their new ‘Discounter’ products and related range and price changes.

These products have been introduced with prices significantly lower than comparable brands and already represent over 5% of our UK food and grocery sales – demonstrating that customers see them as offering great value. The launch represents the biggest single change to their ranges since Value lines were introduced in 1993. By giving customers more affordable choices, they have deflated sales during the quarter by between two and three percentage points. As a result, over 300,000 more customers are shopping with Tesco every week and they are also beginning to see strongly improving sales volumes. This is an important change as inflation begins to subside across the industry.

Chief Executive, Terry Leahy commented: “Tesco has maintained solid progress in sales and profits during the third quarter across the Group. We are pleased with our progress but we are also realistic – the current economic climate, and the strain this is putting on consumers everywhere, is something that all businesses are feeling, including ours.”

“We are adjusting the business to meet the new challenges - focusing on becoming even cheaper for customers, keeping our costs low to help us to do this and managing our balance sheet and cash carefully. As we apply all the resources of the Group to these priorities, I remain confident that Tesco can maintain a strong business performance and pursue its long term strategy even in tough times,” he added.