Tesco like-for-like sales rise 8% during quarter of lockdown

Tesco like-for-like sales rise 8% for Q1
Tesco on Friday reported a 46% rise in online sales for its first quarter.
// Tesco group sales up almost 8% during lockdown quarter
// Shopping frequency was down 32% in the UK, although basket sizes rose 64%
// Tesco said provision of coronavirus safety measures has already cost £65m

Tesco’s sales rose 8.2 per cent to £12.21 billion in the first quarter to May 30.

Across the group, sales rose 7.9 per cent to £13.38 billion, during a 13-week period from the start of March, and almost entirely covered by lockdown.

READ MORE: Tesco sales jump amid warning of “significant” coronavirus costs

With widespread reports of panic buying before lockdown began, and all restaurants and bars shut since March 23, the supermarket sector as a whole saw sales surge.

For Tesco, this meant a 45.8 per cent rise in online sales, during a time in which chief executive Dave Lewis said the retailer had managed to double its online capacity, from 600,000 slots a week to 1.3 million slots a week.

At Tesco’s Express and One Stop stores, sales were up 9.9 per cent as shoppers also looked for the convenience of shopping local under lockdown.

The grocer’s 896 large stores were well-placed to serve customers looking to shop less frequently and buy more on each visit, with sales up 5.4 per cent.

Tesco’s Booker stores reported a 23.5 per cent rise in retail sales, which helped offset a 32.1 per cent decline in the catering side of it business.

The supermarket giant noted that shopping frequency was down 32 per cent in the UK, although basket sizes had risen 64 per cent.

Tesco said that across the quarter as a whole, it delivered 12.6 million orders, including to a priority list of 590,000 vulnerable customers.

In addition to providing more delivery slots for customers, Tesco increased the availability of its click and collect service, which now represents around a quarter of online orders.

Tesco said that as a result of these changes, its online grocery business grew from 9 per cent to over 16 per cent of its total UK sales.

Originally intending to double its online business in the mid-term with the development of at least 25 urban fulfilment centres (UFC), Tesco was forced to put the brakes on construction of a UFC in West Bromwich Extra in March.

Work on the centre has now been completed and Tesco expects to deliver its first customer order next month.

“We are well positioned to capture market growth beyond our original ambition and will continue with the roll out of the UFC programme as we respond to the accelerated shift in customer demand,” Tesco said.

Tesco also noted that its response to Covid-19 has required “significant changes” to its operations, leading to a substantial increase in costs.

“The majority of these costs relate to payroll which includes the provision of twelve weeks’ paid leave to 26,000 vulnerable colleagues, in addition to the recruitment of 47,000 temporary colleagues to cover absence and meet increased demand,” the Big 4 grocer said.

The provision of PPE and safety-related consumables across all of Tesco’s 3628 stores alone cost the retailer £65 million, with Tesco estimating the incremental costs for the full year will come in at £840 million.

The grocer said these costs would be mitigated by the UK’s business rates relief of £532 million and a contribution from its additional sales.

As part of the quarterly report, Lewis thanked Tesco staff for going “above and beyond” during a challenging trading period.

“In just five weeks, we doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures so that everyone who was able to shop in store could do so safely,” Lewis said.

“The costs of doing this have been significant and only partly offset by business rates relief and increased volume.

“We see the balance as an investment in supporting our customers at a time when they need it most.”

Looking ahead, Tesco said that based on assumptions on a continued easing of lockdown in the UK, it expects retail operating profit for the current year to come in at a similar level to 2019/2020.

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