Thursday 23 June 2016 7:41 am

Tesco’s share price looks perky as company announces sale of Harris and Hoole coffee chain to Caffe Nero

Supermarket chain Tesco is selling Harris and Hoole coffee chain to Caffe Nero, it said in its first quarter trading statement this morning.

"Together, these sales allow us to place even greater focus on our core UK business," the company said.

The retailer's share price was up by 2.82 per cent in early morning trading after the announcement.

The company recently said it is weeding out Dobbies garden centres. It is also off-loading Giraffe Restaurants, and its Kipa chain in Turkey.

Phil Dorrell, partner at Retail Remedy retail consultants, said:

Tesco have started to streamline their business, off-loading Dobbies at a profit, The Turkish Kipa stores, Giraffe Restaurants and Harris and Hoole coffee shops. This sharpening of focus can only lead to better retail stores.

Tesco are no doubt improving their offer and by concentrating on their own customers (not those of fringe businesses) they will continue to drive positive like-forl-likes.

John Ibbotson of retail consultants Retail Vision said:

Thanks to Dave Lewis, Tesco’s recovery is back on track and he has managed it in frankly brutal market conditions. In dragging the Tesco supertanker off the rocks and putting it back on course, Dave Lewis has achieved an extraordinary feat.

Lewis is continuing his strategy of reducing the Tesco debt mountain through the sale of non-core assets such as Giraffe, Dobbies, Kipa and now Harris and Hoole. Keep it simple, quite rightly, is the philosophy now.

Tesco's rate of growth is paltry compared to yesteryear and the future promises low profits and slow sales growth. But given the huge challenges Tesco is facing, this performance by Dave Lewis has to be applauded

Ray Gaul of Kantar Retail said:

We expect the trading environment to remain tough for Tesco, and things could get even tougher is the UK votes out of the European Union, which is like to impact grocery prices and currency exchange rates. Inflationary conditions caused by the EU exit might increase the erosion of Tesco shoppers to discount chains like Aldi and Lidl.

Tesco bought Giraffe in 2013 for £48.6m and acquired Dobbies back in 2008 for £150m.

Chief executive Dave Lewis has been selling assets after Tesco's accounting scandal in 2014, when the company overstated its profits by £250m due to an accounting error.

In its first quarter results, Tesco announced UK like-for-like sales were up 0.3 per cent. Total sales for the group grew by 1.8 per cent; group like-for-like sales were up 0.9 per cent.

Lewis said:

We have delivered a second quarter of positive like-for-like sales growth across all parts of the group in what remains a challenging market with sustained deflation.

We are encouraged by the progress we are making. By growing volumes, transforming the way we work together with our suppliers, and further optimising our store operating model we are rebuilding profitability in a sustainable way. 

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