Tesco first quarter sales jump by 8%
Tesco has increased its first quarter group sales by 8% to £13.4 billion and its like-for-like sales by 7.9% as customers bought more food during the Covid-19 pandemic.
In the 13 weeks to 30 May, like-for-like sales rose by 8.7% in the UK after the supermarket benefited from strong online growth of 48.5%. The online uplift meant that Tesco had to increase its delivery slots from 600,000 to 1.3 million per week in the period.
Sales in the retailer’s convenience business grew by 9.5% while sales in its 896 large stores rose by 5.4% as customers used them to shop less frequently and buy more items on each visit.
Tesco said it had to increase its focus on availability and everyday low prices as the Covid-19 pandemic took hold. This meant that promotional participation reduced from 28% to 14%. In addition, there was a major shift in the retailer’s product and category mix as customers increased their purchasing of essential items.
The retailer said the crisis meant it also had to make significant changes to its operations which led to a substantial increase in costs, especially in the UK. Costs included the provision of twelve weeks’ paid leave to 26,000 vulnerable staff members and the recruitment of 47,000 temporary staff to cover absence and meet increased demand.
The retailer also incurred costs relating to the reopening previously mothballed distribution centres, the adaptation of stores and the provision of safety-related consumables and PPE across all 3,628 shops. Tesco estimates that costs will come in at round £840 million for the full year, but expects these to be partially mitigated by UK business rates relief of £532 million and a contribution from additional food sales.
Meanwhile, like-for-like sales in Tesco’s Central Europe business excluding Poland rose by 3.9%. Changes to customer shopping behaviour in the region were similar to the UK, with high demand for online grocery delivery and a change in mix of sales towards more essential food items.
Dave Lewis, Tesco chief executive, said: “In just five weeks, we doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures so that everyone who was able to shop in store could do so safely.
“The costs of doing this have been significant and only partly offset by business rates relief and increased volume. We see the balance as an investment in supporting our customers at a time when they need it most.”
If lockdown restrictions continue to ease across the UK, Tesco said it expects its full year retail operating profit to be at a similar level to the previous year on a continuing operations basis.
