Tesco stirs again as incomes rise, says expert

11-Mar-2015 - Last updated on 11-Mar-2015 at 12:14 GMT

There are signs that Tesco's recovery is damaging some rivals

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Tesco is reawakening as incomes rise and volume sales start to rise in the UK grocery market, according to Clive Black, director and head of research at Shore Capital.

Commenting on data just published indicating that the market was starting to strengthen, Black said: “Accordingly, after a sustained period of slumber, it is noteworthy to our minds that the long standing demonstrable market leader, Tesco UK is now looking like it is close to stabilising its market share position.

“Kantar [Worldpanel] states: ‘among the big four supermarkets Tesco has been the standout retailer. It has posted its strongest performance in 18 months with sales up 1.1% compared with a difficult 2014.

“Increasing sales have helped Tesco arrest its falling market share, which is down just 0.1 percentage point compared with last year’.”

‘Gob smacked’

Black said he was “gob smacked” to see the programme of change that ceo Dave Lewis had implemented in a short time frame and a consequent improvement in performance.

He also claimed Tesco’s recovery was “taking the shine off the growth momentum of Aldi and Lidl, albeit they still gain share aided by new space, and Waitrose”.

‎The top four supermarkets’ tough response to the discounters on pricing had signalled their “free lunch” was coming to an end. He expected to see their sales momentum to slow.

Waitrose’s sales rose 4.9% in the latest quarterly period, with its market share broadly flat, up 0.2% to 5.2%, according to Kantar. In addition, Tesco’s performance had hit Asda, it said, with the supermarket’s sales down by 2.1%, taking its market share to 17%.

Morrisons and Sainsbury had both grown behind the market average, with sales falling by 0.4% and 0.5% respectively.

Aldi and Lidl

Kantar indicated that although Aldi’s sales were up 19.3% compared to a year ago, pushing it to a 5% market share, that had been its slowest growth rate since June 2011. Lidl’s sales, meanwhile, had grown by 13.6%, taking it to a 3.5% market share, in the 12 weeks to March 1.

At the same time, Kantar’s data showed the grocery retail environment continued to favour shoppers’ budgets, with deflation driven to a record low of -1.6%.

The BRC-KPMG retail sales monitor indicated that UK retail sales had increased 0.2% in February 2015 compared to the same month last year. Food sales grew for the third consecutive month, rising by 0.5%, displaying weaker growth than non-food.

Meanwhile, read how Aldi and Waitrose topped a new list of the UK fastest growing retailers.