Tesco Sales Growth Slows as Discounters Stage January Fightback

  • U.K. market leader has slowest growth for five months: Kantar
  • Store openings mean Aldi is now U.K.’s fifth-largest grocer

Tesco Plc’s sales growth has slowed to the lowest in five months as discounters Aldi and Lidl find renewed momentum, according to the latest monthly data for Britain’s grocery industry.

Takings at the U.K. supermarket leader rose 0.3 percent in the 12 weeks ended Jan. 29, researcher Kantar Worldpanel said Tuesday, down on the prior month’s 1.3 percent gain. Separate data from Nielsen also showed Tesco’s growth slowing.

The slowdown is a bump in the road for Chief Executive Officer Dave Lewis, who’s made significant progress halting the march of the discounters through price cuts and a new basic range of fruit and vegetables. Aldi’s market share has overtaken Co-Operative Group for the first time, making the German discounter Britain’s fifth-biggest grocer, Kantar said.

“Discounters’ outperformance of quality operators looks to be strongly reaccelerating,” James Grzinic, an analyst at Jefferies, said by e-mail. That may provide an indication of shoppers switching to cheaper goods in anticipation of a tougher economic climate, he said.

Tesco shares took the news in their stride, rising 0.5 percent to 194 pence as investors continue to focus on the potential benefits of the proposed takeover of Booker Group Plc.

The market leader’s slowdown was at odds with the overall industry, where higher food prices helped lift sales by 1.7 percent. Aldi’s sales growth accelerated to 12.4 percent, with Lidl’s takings gaining 9.4 percent, Kantar said.

Other highlights of the Kantar report included:

  • Food prices rose for a second consecutive period, up 0.7% in 12 weeks to Jan. 29
  • The slump in sales at Wal-Mart Stores Inc.’s Asda eased for a seventh consecutive month. Wal-Mart is scheduled to give an update on Asda’s performance on Feb. 21
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