Tesco's global sales rise by more than 8% as economic recovery takes hold.
This morning, the UK's leading supermarket, Tesco (LSE: TSCO) released a statement covering its trading performance for the 13 weeks to 31 May 2010.
A solid start
Tesco CEO Sir Terry Leahy, who is to leave the group next March, said that the retailer "has made a solid start to the new financial year." Overall, group sales rose 8.2% compared to the prior-year period. However, excluding petrol sales, growth was 6.9%.
In the UK, where Tesco employs nearly 288,000 workers in almost 2,500 stores, total sales including VAT and petrol grew by 6.5%, so Tesco is outperforming most of its rivals.
However, like-for-like sales growth of 3.8% including petrol was flattered by higher fuel prices. Stripping out petrol and VAT, Tesco's like-for-like-sales growth was a feeble 0.1%.
That said, Britain's number-one retailer sees some evidence of a steady consumer recovery in the UK. The group recorded good sales growth in its Finest food range and non-food items, plus sales of televisions rose strongly in the run-up to the football World Cup.
Likewise, the Double Points promotion for Tesco's Clubcard loyalty programme, with 20% more points being redeemed compared to 12 months ago. In addition, Tesco Bank is signing up more customers and the bad-debt trend is improving.
Tesco abroad
Although Tesco's UK growth was somewhat pedestrian, the retailing giant made good progress overseas.
As the global recovery gained momentum, Tesco's international sales (excluding petrol) increased by 12% (5% at constant exchange rates). However, international like-for-like sales were broadly flat overall, with weakness in Asia offset by growth in Europe.
Sales in Asia grew by 15% (5% at constant rates), but were affected by social unrest and political uncertainty in Korea and Thailand. In Europe, sales grew by 7% (4% at constant rates), with an 'impressive' recovery in Ireland offset by weakness in Central Europe, Hungary and Poland.
In the United States, sales at Tesco's Fresh & Easy chain were up 38%, with like-for-like sales climbing due to a growing customer base.
What next?
As I write, these solid but uninspiring results -- bang in line with expectations -- have caused Tesco's share price to rise 2% to 398p.
Sir Terry remarked, "The long-term global recovery is well underway, although the pace and strength of economic recovery varies across our markets. We're in good shape and well-positioned to deliver further growth as the economic environment continues to improve."
Hence, it will be interesting to hear what Sir Terry has to say about productivity gains, growth trends and market share at Tesco's next annual general meeting on Friday, 2 July.
Profit growth of 12% is expected for the full year, so at 398p per share Tesco trades on a forward P/E of 12, while its forward dividend yield is a respectable 3.6%. It certainly looks like Sir Terry will be leaving the company on a high note.
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