Tesco sees “positive progress” though sales still down

Tesco is tackling flagging sales, although more needs to be done, according to a trading statement covering its first quarter this year (Q1). 

Strong product range reduction was helping the company’s recovery, it claimed. “It had too much product choice,” explained Neil Saunders, managing director of analyst Conlumino.

The company had struggled with “a proliferation of offers and deals that left customers confused about the value they were getting; standards that were highly variable across the chain; mediocre levels of customer service; and stores and products that often looked tired and unappealing”, he said.

However, despite a decline in sales, an improvement in like-for-like sales over the first quarter of the year was a testament to Tesco’s productivity, claimed the company’s chief executive Dave Lewis. “Customers are experiencing better service, better availability and lower, more stable prices and are buying more things, more often, at Tesco,” he said.

Speaking of the outcome of range reduction, Lewis added: “Our range reviews are progressing well, enabling us to simplify our offer, further reduce prices and increase availability. We have completed initial range reviews in 15 categories, reducing the number to 20% whilst still retaining a market-leading level of choice.” This had resulted in 180,000 more customers shopping at the chain, according to Lewis.

Out of the wilderness

Like-for-like sales declines in the UK of 4% in the first quarter of last year slowed to 1.3% this year. Group like-for-like sales fell by 1.3% versus 3.4% in the same period last year.

Price cuts on 300 branded products across the quarter, on top of earlier price cutting on brands, was helping Tesco to revive its fortunes, it said.

Jon Copestake, retail analyst at the Economist Intelligence Unit, stated that it was unusual to hail a decline in like-for-like sales as a success in a company as large as Tesco. However, the current performance could be the start of a “turnaround in fortunes” for the firm. “With sales shrinking at a slower rate than in the previous four quarters and transaction volumes growing, there is an indication that lower prices and margins are clawing back customers in the UK,” he explained.

Saunders added: “In essence, this appears to be the beginning of the end of Tesco’s period in the wilderness.”

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