Tesco Records Best Sales Performance Since June, Kantar Says

Tesco Plc had its best quarterly sales performance since June as a revenue decline eased, Kantar Worldpanel said, providing some rare good news for the troubled U.K. supermarket leader ahead of the peak holiday season.

Sales fell 2.7 percent from a year earlier in the 12 weeks ended Dec. 7, the researcher said today, compared with the 3.7 percent decline it reported a month ago.

Tesco is showing “limited signs of stabilization,” Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in a statement. The grocer’s market share of 29.1 percent was down 0.8 percentage point from the year-earlier period, but up on the previous month’s 28.7 percent.

Tesco shares rose as much as 1.9 percent on the news, which comes a week after the retailer said full-year earnings will be almost half an August forecast. New Chief Executive Officer Dave Lewis is ploughing money into turning around the business after Tesco disclosed overstated profit estimates.

Today’s Kantar report also showed that German discounters Aldi and Lidl are still increasing their combined share of the market at the expense of more established competitors. Aldi’s market share rose to 4.9 percent and Lidl’s to 3.7 percent, according to the researcher. While Aldi’s sales growth slowed slightly to 22 percent, Lidl’s accelerated to 18 percent. Month-on-month, Aldi’s market share was unchanged.

“They’re punching well above their weight in a zero-growth market,” Bryan Roberts, a director at researcher Kantar Retail, said of the discounters in an interview yesterday.

Price Deflation

Grocery price deflation deepened in the latest 12-week period, Kantar Worldpanel said, as supermarkets step up discounting in an effort to win back shoppers from budget stores. Prices fell by 0.7 percent on a like-for-like basis.

Only Lidl reduced the share of its sales on some form of discount compared with a year earlier, Sanford C. Bernstein analyst Bruno Monteyne said in a note yesterday. Wm Morrison Supermarkets Plc, the smallest of Britain’s four main grocers, “remain the biggest promoters in the industry,” he said.

Morrison’s 3.2 percent sales decline during the 12-week period was the worst of the main supermarkets, Kantar said. Morrison has given readers of a British tabloid newspaper vouchers for 5 pounds ($7.90) of fruit and vegetables for free with no minimum spending requirement. Asda executives last month criticized such promotions as “desperate measures.”

“We expect grocery deflation to continue well into 2015 as the price war rumbles on,” Kantar’s McKevitt said.

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