Tesco Sales Outpace Grocery Rivals as Turnaround Continues

Tesco Plc was the only one of the U.K.’s four biggest supermarkets to increase sales in the last three months, showing that efforts by new Chief Executive Officer Dave Lewis to revive the business are starting to take hold.

Tesco’s sales rose 1.1 percent in the 12 weeks ended March 1, researcher Kantar Worldpanel said Tuesday in its regular monthly report, the strongest performance for 18 months. Revenue declined at all three of its largest competitors, led by a 2.1 percent decline at Wal-Mart Stores Inc.’s Asda.

“Among the big four supermarkets Tesco has been the standout retailer,” Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in an e-mailed statement. “This resurgence has impacted Asda, which competes for many of the same shoppers as Tesco.”

Tesco shares rose as much as 1.3 percent in London. The Kantar report provides a boost for Lewis, who is shutting dozens of unprofitable stores and plans to move the company’s head office as part of efforts to revive the business. To win back customers, Lewis has lowered prices on hundreds of branded goods and increased the number of staff in stores at peak times.

The sales increase helped Tesco to limit its market-share loss in the 12-week period to 0.1 percentage point, Kantar said. The Cheshunt, England-based grocer had 28.7 percent of the market as of March 1, according to the researcher.

Aldi, Lidl

Like all of the big U.K. supermarkets, Tesco has seen its share of the market eroded by Aldi and Lidl as the German discounters continue to open stores and win new shoppers. Growth rates at the budget chains slowed in the latest period, according to Kantar. Aldi increased its market share to a record 5 percent, although its 19 percent sales growth was the weakest since June 2011. Lidl’s sales increased by 14 percent.

Revenue at Wm Morrison Supermarkets Plc and J Sainsbury Plc contracted by 0.4 percent and 0.5 percent, respectively, in the 12-week period, Kantar said. Morrison is due to report full-year earnings on March 12, with David Potts scheduled to start as the company’s new CEO the following week. Sainsbury is scheduled to publish fourth-quarter sales on March 17.

Tesco shares were up 0.3 percent to 240.9 pence as of 10:15 a.m. in London. Sainsbury shares fell 2.5 percent to 268.5 pence, while Morrison was unchanged at 208.2 pence.

Deflation across the grocery industry worsened in the 12-week period as stores continued to step up discounting, Kantar said. Prices declined by 1.6 percent on a like-for-like basis compared with a year earlier. That followed a record fall of 1.2 percent in the 12 weeks through Feb. 1.

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