Supermarket giant Tesco has taken in over £10bn in UK sales over the last quarter, with customers still in the habit of home cooking over restaurant dining as restrictions gradually lift.
The UK, the chain’s main market, brought in a slight 0.5 per cent lift to sales in the 13 weeks to 29 May, in comparison to the same period last year.
The supermarket group’s total retail sales amounted to £13.3bn, contributing to its two-year like for like growth of 9.3 per cent, which was buoyed by customers eating more meals at home during the pandemic than before Covid-19.
However, shares sank 3.03 per cent in Tesco’s afternoon trading, taking its share price to 224.1p per share.
“We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic,” chief executive Ken Murphy said.
“While the market outlook remains uncertain, I’m pleased with the strong start we’ve made to the year and continue to be excited about the many opportunities we have to create value over the longer term.”
Growth peaked in March at 14.6 per cent, the supermarket said this morning, while it levelled out across April and May as restrictions eased.
Online shopping has seen mass growth since the beginning of the pandemic, with people increasingly hesitant to venture to brick and mortar stores.
Tesco’s online platform, which received around 1.3m orders per week in its first quarter, has enjoyed a two-year sales growth of 81.6 per cent.
Head of markets at interactive investor, Richard Hunter, explained: “It is no mean feat to have nudged sales higher than at the height of the pandemic last year, and significantly ahead of two years ago.
“This could suggest that Tesco is holding on to some of the market share it gained over the last year, which bodes well for prospects. The latest lockdown during the period was also a factor, with meals at home remaining in force.”
‘Static’ share price
Although still marking positive growth, the supermarket chain’s growth has slowed since panic buying gripped customers at the pandemic’s peak – while its share price has lagged.
“Tesco’s first quarter numbers look sluggish, but that’s because they’re lapping the unprecedented demand triggered by the pandemic this time last year,” equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, said.
“While Tesco might be catching its breath as it crosses the finish line, the work doesn’t stop there.”
Chief market analyst at CMC Markets, Michael Hewson said: “The Tesco share price has struggled to make any significant gains since reporting its full-year numbers back in April, which is a little surprising when you look at how well management has managed to scale up the business to deal with the challenges posed by the pandemic.
“The underperformance may well have had something to do with the guidance with management saying they expected sales volumes to decline as lockdown restrictions eased, however, to offset those concerns, there was an expectation that costs would also fall as well,” he added.
Despite not showing much sign of share price growth, the chain’s shares are not completely written off for investors, investment manager at Brewin Dolphin Richard Flood explained.
“Tesco’s shares have largely been static since the payment of the special dividend and subsequent consolidation earlier this year. Still, for investors seeking a solid income, the shares look attractive with a 4.3 per cent annual dividend yield,” Flood said.
Tesco’s share price will be one to watch, Hunter suggested, adding that “the next few months will see the real picture emerging, and for holders of the stock, any positive surprises would be both welcome and overdue.”