Tesco sales growth slows down despite customers eating more at home during lockdown

Tesco, Britain's biggest retailer, has reported a slowdown in underlying UK sales growth, reflecting a tough comparison with last year when consumers stockpiled during the UK's first pandemic lockdown.

Tesco said growth was driven by customers eating more meals at home than before the pandemic
Tesco said growth was driven by customers eating more meals at home than before the pandemic

The retailer said UK like-for-like sales rose just 0.5 per cent in the 13 weeks to May 29, which was ahead of analysts' average forecast of a fall of 1 per cent, but down from growth of 9 per cent in the previous quarter.

Sales in its UK supermarkets rose 0.5 per cent to £10bn – up 9 per cent on the same period two years ago before the pandemic struck.

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The shift to online grocery services looks set to become permanent, with 1.3 million orders a week being placed.

This means online sales are now up 82 per cent on pre-pandemic levels and up 22 per cent on the same period last year.

Non-food and clothes sales helped drive some of the growth, with Tesco remaining open throughout the recent lockdowns whilst non-essential retailers were unable to trade until April.

General merchandise sales, which includes all non-food products, rose 10 per cent and clothing sales rose 52 per cent.

Tesco said it wants to push cheaper prices and it has maintained its Aldi price match scheme on more than 500 lines.

Chief executive Ken Murphy said: “We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic.

"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."

Tesco said growth was driven by customers eating more meals at home than before the pandemic.

Rivals Sainsbury's and Morrisons have forecast a strong recovery in profits this year as the extra costs of the pandemic reduce.

Richard Hunter, head of markets at interactive investor, said: “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, such that UK sales peaked in March at 14.6 per cent ahead of two years ago.

"There was also a notable uptick in general merchandise and clothing sales over the period, growing by 10.3 per cent and 52.1 per cent, while fuel sales also grew by 68 per cent as restrictions began to ease."