Following today’s release of Tesco’s figures for the 19 weeks ending 6th January 2024; Eleanor Simpson-Gould, senior retail analyst at GlobalData, a leading data and analytics company, offers her view: “Tesco’s cautious outlook in Q1 FY2023/24 amid record high inflation levels, is in stark contrast to its latest trading update today for the penultimate financial year quarter, as the UK’s leading grocer upgraded its operating profit forecast to £2.75bn. For the 19 weeks comprising Q3 and Christmas trading, Tesco reported UK sales growth of 7.5%, a 2.4ppt uplift on the same period last year (5.1%), placing it on strong footing as it enters into its final quarter. Tesco’s update invites comparison with Sainsbury’s total retail growth figures, which denote a softer growth of 6.5% owing to entrenched losses in general merchandise and clothing sales for the similar trading period (16 weeks ending 6 January 2024). However, the star of Tesco’s trading update is the resurgence in online sales, Tesco’s investment in Whoosh and fulfilment capabilities have turned the tide, with online sales up 11.5% versus 0.2% growth for the same period in FY2022/23.
“Tesco’s results reflect an empowered strategy focus, upscaling the long-established Clubcard scheme and improving product innovation to fend off discounters, which has been a cornerstone in Tesco’s year of consistent sales growth. With food inflation easing to single digits in November 2023 for the first time in 16 months, Tesco’s Chief Executive Ken Murphy has assured investors that competitive intensity and investment on price will not ease off. Yet, with Marks & Spencer, which today announced 8.1% growth in UK like-for-like sales (l-f-l) for the 13 weeks to 30 December (with food sales +9.9% l-f-l), and Sainsbury’s both investing in product quality, innovation and range to capture customers looking to trade up, this will ensure Tesco must remain focused, safeguarding low-cost price matching against discounters while improving premium range propositions. The challenges ahead for Tesco in Q4 are faceted, with disposable income expected to improve in 2024 and a resurgence in customers trading up to premium ranges. Tesco must utilise the success of its broadened Finest range, up 16.7% l-f-l in the period, and third-party propositions to entice customers to dine in this Valentine’s Day and secure a final sales boost in FY2023/24.
“As the final quarter gets underway for Tesco, the grocer is strengthening its proposition to cement its position as the market leader in the final weeks of Q4, announcing a double Clubcard points scheme, the first of its kind offered in over a decade, which will run for seven weeks to 25 February and enhanced plant-based propositions to capture Veganuary shoppers.”
