The economy is showing signs of having bottomed out and consumer confidence is stabilising, Britain’s most powerful retailer said this week.
Revealing record Tesco profits of £3bn this week, chief executive Sir Terry Leahy said: “There are signs of stability in a number of markets, although it is too early to call a recovery.”
He said while there is still the fear of unemployment, several factors have benefited the consumer in the UK. “We’ve seen petrol prices brought down significantly, energy costs and mortgage rates. Even those on fixed rates are rolling off to variable rates, giving them a better deal. Food prices are no longer rising so weekly bills are not costing more.”
Underlying pre-tax profits totalled £3.1bn for the year to the end of February. Group sales were up 13.5 per cent to £59.4bn and UK sales jumped 9.5 per cent to £41.5bn, with like-for-likes up 4.3 per cent.
Clothing sales fell 2 per cent but Tesco said they had grown in recent weeks and slightly more expensive foods such as salmon and legs of lamb performed well over Easter.
Leahy said consumers employed in the public sector were “starting to shop more” and that there were also signs of stability globally, particularly in Central Europe, and in China – where there was a “big de-stocking of the global supply chain” – the factories are “starting up again”.
Tesco will also relaunch its Clubcard in the UK to “reward loyal customers further” in the next few weeks, and it is also rolling out its telecoms shops under the new name Phone Shop to take on Carphone Warehouse.
US teething troubles
Tesco chief executive Sir Terry Leahy admitted “mistakes” had been made in the US with its fledgling Fresh & Easy chain.
Trading losses were higher than expected at £142m on sales of £208m, with like-for-like sales growth of 30 per cent. Leahy said the market in the US is now shrinking by more than 10 per cent, which is “too much for a new business to cope with against the original plan”.
He said the model has been adapted in response to customer feedback, adding new ranges and changing the ambience of the store.
The grocer is in discussions with manufacturers in the US to stock different pack sizes that customers want. Leahy said when Fresh & Easy made the change in pack size in pet food, sales soared 30 per cent.