Booker, the owner of the Londis and Budgens brands currently being courted by Tesco, said today sales had risen in the first quarter of the year.
Total like-for-like sales rose 0.7 per cent in the 12 weeks to 24 March, Booker said in a trading update today. That was driven by a 4.7 per cent rise in like-for-like non-tobacco sales – although sales of tobacco products fell 7.5 per cent.
Over the year, total sales rose 6.7 per cent to £5.3bn, with like-for-likes in its catering arm rising 4.4 per cent, although sales to retailers fell 0.6 per cent, which it attributed to new rules on tobacco sales.
Shares were flat at 199.1p in the mid-morning, having kicked off trading at 194.5p, 2.3 per cent lower.
Why it's interesting
Many an eyebrow was raised in January when Tesco unveiled plans to buy Booker for £3.7bn. At the time, Tesco said the new group will be "well placed to serve the large, established 'in home' food market as well as the faster growing 'out of home' market".
What really surprised analysts was that the pair said they had been in talks for almost a year. Indeed, such was the flowering bromance between Tesco chief executive Dave Lewis and Booker boss Charles Wilson, they posed for a few pictures before they sealed the deal:
The tie-up hasn't been entirely well-received, though. Earlier this week Schroders, Tesco's third-biggest shareholder, wrote to its chairman asking him to retract the offer.
"Acquisitions destroy value for acquiring shareholders," it wrote.
"We believe the high price being paid for Booker makes the destruction of value even more likely... Tesco is paying over 23 times [its] peak operating profit, a multiple which will make the creation of shareholder value extremely challenging."
Admittedly, today's trading update is unlikely to quell those fears entirely: punishing new rules on the display (you can't) and packaging (plain) of tobacco products has clearly taken its toll on sales. But it was by no means a disaster.
What Booker said
Overall, 2016-17 was a good year. Customer satisfaction was good and sales were the best we have ever achieved. Booker Group remains on track to Focus, Drive and Broaden the business. On 27 January we announced the planned merger with Tesco.
We are excited about the benefits the enlarged group will bring to consumers, our customers, suppliers, colleagues and shareholders. The merger is going through the competition process. Meanwhile it is business as usual as we continue to improve choice, prices and service for our retail, catering and small business customers.
A solid year, but tobacco rules are taking their toll.