Weather brings a trading chill to Tesco

Heavy snow across Scotland, Yorkshire and the North West forced many customers to walk to their local shops rather than drive to a supermarket.

This meant they could carry less shopping home, but the wintry weather has boosted sales at the group's smaller Tesco Express stores.

Tesco, the world's third biggest retailer, reported a 1.5 per cent increase in third quarter like-for-like UK sales, up on the first two quarters when like-for-like sales rose by 1.2 per cent.

The third quarter covered the three months to the end of November.

Tesco, Britain's biggest retailer, said its stores had generally held up well under the Arctic conditions.

Tesco sent out its delivery lorries three hours earlier every day to give them more time to get to stores through the icy conditions.

It also used 150 specially adapted quad bikes to clear snow from its supermarket car parks.

Apart from the disruption caused by the cold snap, Tesco is optimistic about its future trading prospects.

Finance director Laurie McIlwee said like-for-like sales in the UK will continue to be positive.

"There's a good, steady, slow recovery going on in the UK," he said.

"It's hard to call what the fourth quarter will be like, but it will be an improvement in like-for-like sales and we still feel there's good growth for us in the UK," he added.

Mr McIlwee said the group's improved UK performance had been achieved despite a reduction in food inflation over the quarter, with prices rising by around 0.7 per cent.

Tesco said it is gearing up for its biggest ever Christmas with Xbox Kinect games and iPads already proving popular and helping early festive sales exceed its expectations.

The group also reported strong sales of copies of the blue dress worn by Kate Middleton on the day of her engagement to Prince William.

Group sales increased by 8.8 per cent in the third quarter to November 27, led by 23.4 per cent growth in its supermarkets in Asia.

Tesco, which has over 120 stores employing over 13,000 staff across Yorkshire and Humber, has created around 800 new jobs in Yorkshire and the Humber over the past year.

Further expansion is planned for the region next year as Southern-based grocers such as Tesco and Sainsbury's move North to expand their footprint.

For the first time in three years, Tesco said that all 14 nations where it operates showed like-for-like growth in the quarter.

Tesco Direct, the company's non-food delivery business in the UK, reported a sales increase of 30 per cent, while non-food sales through its stores were up three per cent.

Sales of its Tesco Finest upmarket food and drink range reported double-digit sales growth compared with two years ago.

The group's shares closed up 2.4 per cent last night, to finish the day at 430.2p, a rise of 10.2p.

Freddie George, retail analyst at Seymour Pierce, said the results were a touch better than expectations and retained his "buy" rating for the stock.

He said that Tesco is capable of delivering double-digit growth for the foreseeable future and is well positioned to benefit from global economic growth and inflation.

Analyst Sam Hart at Charles Stanley said: "Going forward, we expect trading conditions in the UK food retailing industry to remain relatively benign.

"Consumer demand should be resilient in the face of austerity measures and the competitive environment is expected to remain rational."

Tesco, which runs more than 5,000 stores in 14 countries, said third-quarter sales rose 7.2 per cent excluding fuel and at constant exchange rates. That included an 11 per cent rise overseas.

Mr McIlwee said that UK underlying sales, adjusted for changes in VAT sales tax, were up by between 0.7 and 0.8 per cent over the third quarter.

That was ahead of the average analysts' forecast for a 0.3 per cent increase and compares with recent quarterly rises of 1.3 to 2.1 per cent at Tesco's rivals Leeds-based Asda, Sainsbury's and Bradford-based Morrisons.

In addition to good growth in Asia, Tesco reported a 9.8 per cent increase in like-for-like sales in the United States and underlying growth in all its European markets for the first time in three years.

"We are encouraged by sentiment and momentum," said Clive Black, an analyst at brokerage Shore Capital.

Tesco is the world's third biggest retailer behind France's Carrefour and US market leader Wal-Mart, which owns Asda, in terms of annual sales.

End of era as chief to step down

Terry Leahy, the man credited with turning Tesco into the world's third biggest retailer, will step down next March.

He will be replaced by Philip Clarke, who rose from a part-time shop-floor job in his schooldays to head of Tesco's international businesses in Asia and Europe.

Analysts said Mr Leahy's departure was akin to Sir Alex Ferguson retiring as manager of Manchester United – representing the change of an era.

Analysts have applauded the appointment of Mr Clarke, only the sixth chief executive in Tesco's 91-year history. He has been described by one company insider as "a personable guy, not a publicity seeker".

Mr Leahy said: "I feel my work is almost complete. We're coming out of a difficult recession which I've steered the business through."