Tesco shares climb as it builds its UK market share

Tesco’s UK sales are rising at the fastest pace for three years, industry data showed, signalling the recovery at Britain’s biggest supermarket group is gathering pace.
Tesco shares climb as it builds its UK market share

Shares in the company climbed over 4% after market researcher Kantar Worldpanel said Tesco’s sales grew by 2.2% year-on-year in the 12 weeks to November 6, boosting its share of Britain’s grocery market to 28.2% from 27.9% this time last year.

The shares have risen 43% so far this year, with the firm reporting three straight quarters of underlying sales growth in its main British market.

Last month’s Kantar report showed Tesco growing its UK market share for the first time in five years.

“Tesco’s continued sales acceleration and it winning market share is the key feature this month, despite it having a declining share of retail space,” said HSBC analyst David McCarthy, who earlier this week upgraded his stance on Tesco to ‘buy’.

Kantar revealed most of Tesco’s gains came from its own-label products, both its cheaper Farm Brands and its more upmarket Finest range.

While Tesco’s momentum continues to build, Aldi and Lidl saw their sales growth fall to the slowest rate since 2011, up 10.2% and up 6.1% respectively, Kantar said.

However, Kantar noted the discounters are still attracting new shoppers, helped by continuing store openings.

Britain’s other major supermarkets — Sainsbury’s, Asda, and Morrisons — saw sales declines of 0.7%, 5%, and 2.4% respectively, though Morrisons’ fall reflected the closure of some stores.

Kantar also said deflation in Britain’s supermarket sector weakened to 0.5% in the 12 weeks to November 6 and predicted that after more than two years of deflation prices could start to rise in the coming months.

“We’re likely to see prices starting to creep up again in December, unless retailers choose Christmas to unleash a new round of price cuts,” said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

“Although it’s tempting to link any potential price increases to Brexit and the devaluation of sterling, it’s worth remembering that deflation has been easing since December last year, well before the referendum.”

Reuters

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