The Tesco share price is down almost 2.5% today after the supermarket posted a disappointing Q1 report chief executive Dave Lewis put down to a combination of wet weather and even damper consumer sentiment.
The company posted figures that showed slowing growth over the three months to May 25th. Mr Lewis pointed out that over the same period last year shoppers had been encouraged by good weather and the focal point of a royal wedding. Brexit uncertainty was highlighted as a further weight on consumer sentiment:
“I try not to talk about the weather but there comes a point where you need to mention it at least once”
“There is some weakening in consumer sentiment in the UK and clearly part of that is driven by the political situation.”
Despite those headwinds, Mr Lewis insisted that Tesco had nonetheless
“outperformed in both sales and volume terms as we made further investments in range, price and loyalty”.
Like-for-like sales across the supermarket’s core UK unit were up 0.4% on the same quarter last year but growth was down compared to 2.1% a year earlier and 1.7% over Q4 of the last fiscal year. However, it was still the 14th consecutive quarter of sales growth. Across the whole group the central European unit was the worst performer, dragging overall performance down to sales growth of just 0.2% excluding fuel and VAT costs.
Tesco is the UK’s largest supermarket by market share – holding 27.3%. The company is also the country’s single biggest private sector employer with over 300,000 staff in the UK. Overall the company operates 6800 supermarkets and smaller convenience stores with a total employee roster of 440,000.
Current CEO David Lewis was recruited from consumer goods conglomerate Unilever in 2014 and has been credited with sparking a turnaround in Tesco’s fortunes which had suffered from increased competition from German discounters Lidl and Aldi and a number of scandals. Last month he announced that the turnaround goals set out when he took the reins have either already or are close to being met. Cost savings of £1.5 billion being achieved by next year, 2020, and a group operation margin of 3.5%-4% were two of the key objectives.
One of the biggest contributors to meeting those goals has been a withdrawal from several international markets and divestment of non-core businesses as well as redundancies and the acquisition of wholesaler Booker.