New fresh food ranges boost Tesco sales
Group like-for-like sales grew by 0.9% for the 13 weeks to May 28 2016, with UK like-for-like sales up by 0.3%.
The supermarket chain said that seven new exclusive fresh food brands launched in March had helped to meet customers’ shopping needs.
It said that consumers were able to save nearly £1.60 (about 17%) off the cost of a typical basket of 10 of the most popular meat, fruit and vegetable lines by choosing the new ranges.
Customers traded to new brands
A significant number of customers had traded into the new brands, with a total deflationary impact on sales of around 0.7%, it said.
Two-thirds of Tesco customers had now bought products from the new ranges. Customer satisfaction scores of quality and taste were said to be “exceptionally high”, at more than 90%.
Tesco also proposed the sale of its coffee shop chain Harris + Hoole to Caffé Nero, in order to allow the retailer to focus on its core business. This followed the sale of the Giraffe restaurant chain to Boparan Restaurant Holdings, owned by 2 Sisters boss Ranjit Singh.
Work closely with suppliers
Tesco said it was working more closely with suppliers to enhance the uniqueness of its ranges with “exciting and exclusive new products”.
By working in partnership with suppliers, the retail giant claimed it was also reducing costs by improving efficiency and leveraging scale.
Dave Lewis, Tesco chief executive, said: "We have delivered a second quarter of positive like-for-like sales growth across all parts of the group, in what remains a challenging market with sustained deflation.
“Our new fresh food brands are performing very well, with over two-thirds of our customers having bought products from the new range.”
What the analysts said
Verdict Retail senior analyst David Alexander described the second consecutive quarter of like for like growth as the “green shoots of recovery” . He said that “rebuilding trust” was at the forefront of Tesco’s project to regain lost custom.
“Much was made of the fact that its new ‘Farms’ fresh food brands are named for non-existent farms and give the impression of having been sourced in the UK, despite many of them being sourced from overseas,” he said.
Alexander added that the ‘Farms’ brands were a rare extension of Tesco’s offer, during what has largely been a “process of stripping its proposition back to the core” under boss Dave Lewis.
He added: “Cosmetic changes to Tesco’s proposition like the rebranding of its fresh food ranges may draw the ire of commentators, but it is the profound changes to Tesco’s proposition and strategy that are proving to be pivotal in restoring that crucial line of trust between the grocery giant and its customers.”
Planet Retail, senior retail analyst David Gray said that growth was expected from the supermarket driven by volume growth against the core food business.
He said: “This is encouraging news, considering Tesco has been putting major efforts into improving the proposition through range enhancements, price investments and store refreshes (where it is taking a more mission-based approach to store layout).
“Upward-facing like-for-likes also come at a time when deflation is still an issue for the wider industry, showing just how far Tesco has come.”
