Tesco turnaround continues as rivals suffer

Posted by Tom Line in Personal Finance on 13 March 2015 - Tom worked as a Credit Analyst at checkmyfile until 2015

Sales at Tesco grew by 1.1% in the three months to March 1st, the retailer’s strongest sales for 18 months, with its major rivals suffered as a result. Asda, its nearest rival, saw sales drop 2.1% in the same period, the worst performance in the sector along with the Co-operative.

The new boss at the firm, Dave Lewis, immediately stamped his mark on the supermarkets profitability by improving all areas of the business including customer service, profit availability and pricing strategy. Tesco has recently been renegotiating deals with major suppliers in order to pass on savings to its customers.

The country’s biggest retailer now controls 28.7% of the market, down just 0.1% on the year before, reinforcing many analysts view that 2015 will be the year that Tesco resurges.

Asda had previously managed to sustain positive growth while rivals underperformed, however, it blamed the increased use of discount vouchers by its competitors as being the reason for its recent poor performance. Asda believes this tactic to be unsustainable long-term as it eats in to the profits of its competitors.

Head of retail and consumer insight at Kantar, Fraser McKevitt, said, “Asda is really being caught in the crossfire of Tesco’s mini-resurgence. There is not room for all of the big four to grow and so when Tesco’s sales rise the others suffer”.

Of the remaining “Big Four” supermarkets, Sainsbury’s and Morrisons sales fell 0.5% and 0.4% respectively. Both retailers have seen the decline slow in recent months as they battle to keep customers.

The discounters, Aldi and Lidl, have continued their assault on the industry with sales rising 19.3% and 13.6% respectively. Aldi now has a market share of 5% and Lidl 3.5%. Aldi’s growth, however, is showing signs of decelerating as the most recent results for the three months to March 1 are its lowest since June 2011.

At the other end of the scales, upmarket retailer Waitrose saw sales rise by 4.9% as customers take advantage of its price-cutting offers and multi-buy deals.

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