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Tesco sales rise as falling inflation fuels grocery shopping splurge

Tesco's performance has improved over the past 12 months.
Tesco's performance has improved over the past 12 months.

Supermarket giant Tesco has reported an increase in sales and market share as inflationary pressures eased and its efforts to keep prices low for customers continued to pay off.

The UK’s largest grocery firm posted total retail sales of £15.3bn in the 13 weeks to 25 May, up 3.4 per cent compared with the same period last year. Within this, food sales rose five per cent, while online sales grew 12.5 per cent.

Based on data from Kantar, Tesco said its UK market share grew 52 basis points to 27.6 per cent, ahead of all its key rivals, with 15 consecutive periods of positive switching gains.

The company has invested heavily in keeping prices low to maintain and grow its position in the market.

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Tesco posted a UK revenue of £13bn, up 3.4 per cent like for like. Its fuel sales dropped 4.4 per cent.

However, its wholesale arm, Booker, saw sales dip 1.3 per cent to £2.2bn. It was dragged down by weaker sales from tobacco and the Best Food Logistics business.

Chief executive Ken Murphy said: “We continue to be the cheapest full-line grocer and are the most competitive we’ve ever been, with our value, product quality and service driving better brand perception and customer satisfaction.

“Our market share reflects this, growing more than at any other time in the past two years, with customers switching to us from other retailers, shopping with us more often and with more in their baskets.”

Tesco reiterated its guidance for the full year, expecting a retail adjusted operating profit of at least £2.8bn and retail free cash flow of between £1.4bn and £1.8bn.

The firm revealed in April that its adjusted operating profit grew by almost 13 per cent to £2.93bn for the year to February on the back of the continued growth.

Last month, Tesco said it would hand Murphy a £9.93m pay package for the past year, more than double what he received a year ago, after bonuses were boosted by the strong recent performance.

“Tesco has done exceptionally well to grow market share given rising competition. Its full-line offering sets it apart from the likes of Aldi, and its product proposition puts it ahead of other big names,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“Moving forwards, investors will want to see further growth kicked out from wholesaler Booker – as well as a clearer understanding on what the next chapter looks like for food.”