Tesc-Woes

Image source: ZhakYaroslav - Shutterstock

What's going on?

Tesco gave a disappointing results update on Friday after its customers cut back a little.

What does this mean?

Looks like Brits have been taking Tesco’s “every little helps” motto seriously: they’ve been saving money by doing everything from making fewer car journeys to swapping pricey products for cheaper alternatives. That’s not quite what the UK’s biggest supermarket intended: Tesco reported a greater-than-expected 1.5% drop in UK same-store sales last quarter versus the same time last year.

But while everyday customers kept their purse strings suitably tight, more caterers and businesses flocked to Tesco’s Booker wholesale business now that lockdowns are nowhere in sight. The segment boasted a 19% uptick in sales from last year, which – along with a solid performance from Tesco’s Central European stores – helped keep overall sales growth in the green at 2%. This year will still be tough, mind you: Tesco already warned in April that profits will probably be squeezed this year, as it plans to cut prices to keep customers from checking out cheaper rivals.

Why should I care?

Zooming in: Bigger is better.
Still, most analysts believe Tesco has enough size and sway with suppliers to survive the downturn better than any of its UK retail rivals. So far, so good: monthly industry data shows it’s consistently outperformed the wider market and Sainsbury’s, Asda, and Morrisons – its three biggest rivals. And sure, German discounters Aldi and Lidl might’ve grown the fastest in the three months before mid-May, but Tesco still managed to expand its leading market share to 27.4%.

The bigger picture: Fine dining.
Tesco said its product prices have increased by under 7%, but that might not last long: grocery researchers predicted this week that UK food price inflation would likely peak at 15% this summer, and stay high until 2023. You’ll probably feel the pinch: they predict the average family of four will spend $529 a month on groceries by January 2023, up from $487 this January.

Originally posted as part of the Finimize daily email.

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