TESCO, Britain’s largest supermarket group, yesterday proved its resilience to a bitter price war with its rivals this spring as it revealed a 7.8 per cent jump in underlying sales in the three months to mid-May.
For the seventh successive quarter, Tesco increased its rate of underlying sales growth in the UK, helped by buoyant sales of clothing and other non-food items. Tesco shares rose 5¼p to 268¼p as investors welcomed underlying sales growth figures well ahead of City expectations of about 6.5 per cent.
Analysts estimate that non-food sales rose 13.5 per cent in the three months to May 22.
Speaking at Tesco’s annual meeting in London, Sir Terry Leahy, chief executive, said: “I am particularly pleased that our core UK food business has continued to perform very strongly in the first quarter.”
Recent analysis by UBS, the bank, said Tesco was narrowing the gap between its prices and those of Asda, widely seen as the cheapest supermarket.
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Analysts said that Tesco’s underlying sales performance was also assisted by contributions from newly converted T&S Stores, the convenience chain that was bought by the grocer last year.
Total sales rose by an impressive 11 per cent in the quarter. Tesco’s underlying sales growth is expected to slow this summer as the chain faces strong comparative trading figures compared with last year, and as Safeway gets into gear under its new owner, Wm Morrison.
Friends of the Earth staged a protest against Tesco’s powerful market position outside the annual meeting.