Published: Fri, January 12, 2018
Finance | By Kristine Clayton

Why Tesco is being punished despite posting growth

Why Tesco is being punished despite posting growth

Tesco Ireland recorded its highest market share growth in five years during the third quarter as like-for-like sales rose 3 per cent.

The figures are a further indication that Tesco's turnaround under chief executive Dave Lewis is firmly on track.

The group, which reset its strategy in November two months after Archie Norman joined as chairman, said clothing and homeware like-for-like sales fell 2.8 per cent in the 13 weeks to December 30th, its fiscal third quarter.

The supermarket posted like-for-like sales growth of 2.3 per cent across the third quarter and 1.9 per cent in the six-week period to 6 January at its United Kingdom stores.

Like-for-like sales in the United Kingdom went up 2.3%, having increased 2.1% in the second quarter.

In the four weeks before Christmas Day Tesco enjoyed "record sales and volumes" and in the first week of December Tesco reported its biggest ever week of sales, outstripping the market by almost four per cent in fresh food.

However, general merchandise like-for-like sales fell 0.6 per cent.

According to reports, Tesco took a significant hit from lost tobacco sales after the collapse of wholesaler Palmer & Harvey past year put an extra strain on its distribution network.

Similarly, Marks and Spencer Group lost 4.5 percent after reporting a 2.8 percent fall in like-for-like sales for its struggling clothing and home divisions over the Christmas quarter.

"Whilst I am pleased to say these challenges have now been resolved, they took the shine off an otherwise outstanding performance for the period as a whole", Lewis said.

While inflationary pressures remained a problem for many United Kingdom food firms, Tesco said it had continued to work with its supplier partners to help mitigate the impact on its customers.

However, the UK's biggest supermarket said it had been hit by wholesaler Palmer & Harvey's fall into administration near the end of 2017.

Supermarket Morrisons also had promising financial results.

However in Asia, sales were down nearly 10pc in the three month period, which the company said reflected the ongoing impact of ceasing unprofitable bulk selling activities in Thailand.

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