- Dave Lewis targets sales momentum but warns there is “much more to do”
- Tesco boss refuses to call Christmas the start of a big four fightback
- Lewis warns the grocery market will remain “incredibly volatile”
- But he hails investments in availability, range, quality and price as festive like-for-likes rise 1.3% in Tesco’s core UK business
Tesco boss Dave Lewis is seeking to build momentum after the grocer exceeded Christmas expectations, but warned there is still “more to do.”
Lewis refused to get carried away after Tesco posted a 1.3% hike in UK like-for-likes for the six weeks ending January 9 and a 1.5% fall for the 13-week period ending November 28 – beating analysts’ forecasts that predicted a fall of around 2% during the third quarter.
Tesco’s results came following updates from Morrisons, which reported a 0.2% rise in like-for-likes, and Sainsbury’s, which also beat City estimates by recording a 0.4% dip in like-for-like sales.
The big four, which also includes Walmart-owned Asda, have faced an onslaught from discounters Aldi and Lidl, who have wooed shoppers with rock-bottom prices and grown their combined market share to almost 10%. But Lewis refused to call the festive period the start of a big four fightback against the duo and said the market remained “incredibly volatile.”
“These results show another step in the right direction. We are more competitive than we were last year.”
Dave Lewis, Tesco
He said: “We are obviously pleased with the performance over Christmas, but I don’t think that takes away from the conditions that make the market extremely challenging. We recognise our progress, but continue to say there is much, much more to do.
“There are things we will continue to want to invest in and we don’t see signs of deflation changing.
“We see a challenging market continuing for the near term and we have got ourselves focused on trying to improve the competitiveness of our offer and the competitiveness of the business, but we are not forecasting a sudden improvement in the market in the near term.
“These results show another step in the right direction. We are more competitive than we were last year, all the way through the year our deflation has been more than the market as we’ve invested in making our offer more competitive.”
Lewis added: “We have aspirations to keep the momentum that we’ve got ongoing. We have plans that we hope will do that, but plans are affected by what else is happening in the market place.
“The market is incredibly volatile and we continue to be in a place where we are investing in our business in a way that we will deflate our top line perhaps more than the market. All of that will play through in the next three, six, nine, 12 months, and probably even longer.”
Lewis hailed investments in customer service, range, availability and price, which drove customer transactions up 3.4% and sales volumes up 3.5% during the six-week Christmas trading period.
Customer satisfaction improved, aided by the recruitment of 4,000 seasonal shopfloor staff, while “the lines that matter most” to customers at Christmas were 5% cheaper than they were in 2014.
Lewis shrugged off suggestions that its larger Extra stores were “a weight around our necks” after the big-box stores swung to like-for-like sales growth during the Christmas trading period, while its c-store business “continued to be strong”, reporting a near 3.5% uplift in like-for-likes during those six weeks.
Lewis said: “We are trying to put the customer right at the centre of everything that we do.
“We are changing elements that allow us to give customers better service and, at times when reliability, consistency and quality really matter, we have been able to be very competitive”
Dave Lewis, Tesco
“We are changing elements that allow us to give customers better service and I think what customers notice is that, at times when reliability, consistency and quality really matter, we have been able to be very competitive.
“We’ve seen the increase in transactions and volumes as more people have done their shopping with us.”
Off the back of the results, Lewis said Tesco’s full-year operating profits would be “in line” with published guidance of around £930m.