Tesco sales begin to bounce back

15 August 2012 10:36

Tesco sales begin to bounce back

Tesco's recovery plan seems to be gaining strength, as new market share figures imply that the supermarket group is beginning to close the gap on its rivals. The data from researcher Kantar Worldpanel said that the UK's biggest grocer saw its market share slip slightly to 30.9% in the 12 weeks to 5th August, but its sales growth of 3.4% was significantly higher than the 0.7% a month ago, indicating a significant improvement in performance.

Tesco's sales have come under pressure in recent months, leading to its first profits warning in 20 years, but chief executive Philip Clarke unveiled a recovery plan, including pumping £1 billion into the UK business, with extra staff, revamped stores and more special offers.

Meanwhile, the overall grocery market saw sales grow by 3.9%, up from 2.1% a month earlier, as it benefited after price inflation fell to its lowest for 18 months and a possible boost from the Olympics.

However, Tesco continued to come under pressure from its rivals, with Asda and Sainsbury's showing growth of 6.2% and 4.6% respectively.

Of the 'big four' supermarkets, Morrisons put in the weakest performance, with a sales increase of just 1.8% although the discount supermarkets continued to thrive, with Aldi seeing growth of 26% and Iceland up 7%, boosted by a strong frozen foods market.

Fraser McKevitt, retail analyst at Kantar Worldpanel, said: "It's too early to attribute improved grocery sales to the Olympics, however, the increased market growth rate coincides with the opening week of London 2012 and the better weather in July.

"Shoppers might not yet notice it at the tills, but they are starting to benefit from lower grocery inflation, with prices now rising at 3.2% – the slowest rate for 18 months and a sign that things are starting to look up."

But despite the easing in food price inflation, economy products retained their popularity, with the lowest priced own-branded lines, such as Tesco Everyday Value, growing at 13%, while premium own-label sales are falling by 4% year on year, he added.