Tesco's quarterly sales slow less than expected after Booker boost

For the 13 weeks ended 26 May, UK like-for-like sales grew 2.1% and Ireland 3%, down slightly from 2.3% and 5.3% in the fourth quarter of last year, while Booker added 14.3% growth.

Central European operations were said to have delivered a strong underlying performance but LFLs sales fell 1% due to new Sunday trading laws in Poland and Slovakia. LFL sales in Asia fell 9%, which was an improvement from the 14% quarterly decline preceding it.

Overall, group LFL growth came out at 1.8%, higher than any of period in the past year and Tesco's tenth straight quarter of LFL sales growth.

"Our growth plans are on track and we are pleased with the momentum in the business," said chief executive Dave Lewis.

"We remain well-placed to serve our customers better and deliver on our medium-term financial ambitions. We are delighted with initial progress on Booker, and are focused on delivering the synergy benefits that our merger brings."

One change saw Tesco extend a two-store trial of the top 30 selling Booker lines, rolling out a similar range to over 50 more Tesco stores.

Online shopping business performed strongly in the quarter, with both transactions and basket size growing year-on-year, helped by the roll-out of further innovations including the 'Spoon Guru' lifestyle and dietary search filters and improvements to the website and mobile app.

General merchandise as a whole negatively impacted total sales growth, as further work is done to refine ranges, though seasonal categories performed particularly well. Clothing LFL sales were up 1.7% with full price sales participation in stores increasing by 140 basis points year-on-year to over 87%.

Overall, the results point to strong momentum, said analyst Neil Wilson at Markets.com.

"The key number - group like-for-like sales - rose 1.8%, slightly ahead of expectations and a sign that the investment in price cuts and relaunch of own brand products is paying off in sales at least, albeit margins are another matter.

"The good news is that the UK is doing better with LFL sales +2.1%, which beat expectations and is a healthy performance given the pressures it faces in terms of discounters. It does represent a slight softening from the last two quarters but it would be churlish to punish such a performance."

He said international sales were a disappointment given the recent uptick.

"Ten straight quarters of LFL sales growth in the current market is not to be sniffed at. These are positive results, shares could inch higher on the open."