Tesco’s recent recovery stalled last month, as discount retailer Aldi continues to expand its foothold in the UK grocery market, posing a challenge to chief executive officer Dave Lewis in his effort to revive growth at the UK’s largest supermarket operator.
Tesco’s sales growth slowed to 0.3 per cent in the 12 weeks through 29 March, following the 1.1-per-cent increase recorded a month ago, researcher Kantar Worldpanel said in its recent monthly report. With a market share of 5.3 per cent, Aldi is now the UK’s sixth-largest supermarket, having expanded its share by 0.7 percentage points over the last year.
“Growth has been fuelled by over half a million new shoppers choosing to visit Aldi this year,” Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in an emailed statement. The combined 72.8-per-cent market share of the biggest four retailers is at the lowest level in a decade, he said.
Under Lewis, Tesco is closing dozens of unprofitable stores and has lowered prices on hundreds of branded goods to lure back customers. The impact will become clearer on 22 April, when the company is scheduled to report full-year earnings.
Aldi’s sales rose 17 per cent in the same period, Kantar said. Fellow German discount chain Lidl increased its sales by 12 per cent.
Leading Rivals
Despite recording lower growth, Tesco continues to outperform the UK’s largest supermarkets. Revenue at J Sainsbury Plc rose 0.2 per cent, returning to growth for the first time since August, Kantar said. The sales decline at Wm Morrison Supermarkets Plc worsened to 0.7 per cent, while revenue at Walmart’s Asda fell 1.1 per cent.
“Sainsbury’s performance is a bit more resilient than feared, given the company’s strong overlap with Tesco, which is demonstrably stabilising,” Clive Black, an analyst at Shore Capital, said by phone. “However, Morrisons’ trading momentum is concerning, given the company’s easy comparables from last year.”
Sainsbury’s shares rose 1 per cent to 272.2 pence, while Morrisons’ shares were little changed.
After setting a record a month ago, price deflation in the grocery industry reached a new low of 2 per cent in the 12-week period.
Bloomberg News, edited by ESM
