Tesco maintains growth as revival gains momentum

London / Agencies

Tesco Plc reported a second straight quarter of UK sales growth, the first time it’s done so in five years as
the grocer’s turnaround gathers
momentum.
Excluding fuel, UK same-store sales rose 0.3 percent in the 13 weeks to May 28, Britain’s largest retailer said on Thursday. That compares with the median of 13 analysts’ estimates for a 0.2 percent increase.
The sales growth marks another step for Chief Executive Officer Dave Lewis in his effort to revive the grocer after years of declining market share and an accounting scandal. To help sharpen management’s focus, Lewis this month jettisoned its Turkish grocery business as well as its UK garden-center and restaurant chains. That process continued Thursday with the sale of the unprofitable Harris & Hoole coffee-shop chain.
“This sharpening of focus can only lead to better retail stores,” said Phil Dorrell, an analyst at consultant Retail Remedy. “Staying in positive territory is a big endorsement of the turnaround strategy.”
Tesco shares rose 1.1 percent to 168.2 pence at the start of trading in London. They have fallen by almost a third since the start of April amid concerns that the price cuts it’s made to improve sales will dent profitability.
Harris & Hoole on Thursday became the latest part of Lewis’s clean-up. The chain is being acquired by rival Caffe Nero for a price that Chief Financial Officer Alan Stewart said “isn’t material.”
Harris & Hoole made a pretax loss of 25.6 million pounds ($37.8 million) in the 53 weeks ended March 1, 2015, according to documents filed with the UK’s Companies House. Tesco bought out its partner in the venture in
February.
The grocer has no plans for any further asset sales at the moment, Lewis said on a conference call with reporters.
In the grocer’s other European businesses, same-store sales rose 2.8 percent. Businesses in Asia recorded growth of 3.3 percent.
Tesco’s overall business rebounded into profit in the year to February on strong sales, after a vast property writedown and challenging home trade sparked a record £5.7-billion loss in its previous financial year.
In recent years, Tesco’s performance has been severely hurt by increased competition in Britain, particularly from German-owned discount retailers Aldi and Lidl, as well as supermarkets Morrisons, Sainsbury’s and Walmart-owned Asda.
Tesco has also exited its businesses in South Korea and the United States amid fierce competition abroad.