Tesco’s trade improved over the past month, delivering a fillip to new chief executive Dave Lewis, ahead of delayed half-year results due later this week.
According to Kantar Worldpanel, the consumer research group, Tesco’s sales of groceries fell 1.5 per cent in the four weeks to October 12, with only Asda achieving a better result.
In contrast, sales at J Sainsbury, which said this month that the supermarket sector was suffering from a “perfect storm”, saw its sales of food, beverage, alcohol, household and health and beauty products fall 4 per cent, while the decline at Wm Morrison, which has invested heavily in cutting prices, was 4.6 per cent.
Tesco’s performance offers a glimmer of hope for Mr Lewis, who on Thursday is expected to report a near halving of first-half profit, after he revealed last month that an estimate announced just weeks earlier had been overstated by £250m.
The Financial Times reported on Friday that Mr Lewis had told staff that the performance in food was improving.
He said in an internal memo that Tesco’s “recent performance in food has been one of our strongest for a very long time”.
He added: “Whilst one swallow does not make a summer, we can take some small comfort that our efforts are having an impact.”
Industry insiders attributed the improvement to the promotions that Tesco has been carrying out to stimulate trade, together with lower petrol prices, which encourage customers to drive to out-of-town stores.
Including non-food items, Tesco’s sales fell 2 per cent in the four-week period, while Asda’s sales fell 0.7 per cent. Sales in terms of the money going through Sainsbury’s main store tills fell 2.8 per cent, while the decline at Morrison was 4.8 per cent. Aldi’s sales rose 25.4 per cent in the four weeks, while Lidl’s total increased 19.9 per cent.
The improvement comes as Mr Lewis prepares to update the City on the impact of the profit restatement. People familiar with the situation expect the impact to be contained within the £250m forecast. This is still expected to lead to an almost halving of first-half pre-tax profit, however, from £1.59bn in the first six months of 2013 to £850m this time.
Dave McCarthy, analyst at HSBC, said cutting Tesco’s prices, as well as improving its quality and service could cost £3bn.
He sais he also expected Tesco to announce “news soon on a strengthened management”, possibly accompanied by a rights issue.
Tesco’s total sales performance was poorer over the 12 weeks to October 12, when sales at Britain’s biggest supermarket chain fell 3.6 per cent – the worst performance of the “big four” supermarkets.
Like-for-like food prices fell 0.2 per cent, record low since Kantar Worldpanel began recording grocery price inflation in October 2006.
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