Fallen giant, Tesco, is starting to find its feet, says Knight Frank’s head of retail research


Tesco, the fallen supermarket giant, is beginning to find its feet, according to Stephen Springham, head of Knight Frank retail research.

Commenting on the retailer’s Christmas trading performance, Springham said: “Tesco, like Morrisons, has defied the doom mongers. Trading performance over the festive period was far better than expected, nay feared. For the six weeks to 9 January, City consensus forecasts were for a like-for-like decline of -2.3% – in the event, the business actually achieved positive like-for-like growth (exc fuel) of +1.3%. Volumes were up +3.5% and customer transactions up +3.4%.

“True, the like-for-like figure for the longer Q3 period was still negative (-1.5%), but the overall direction of travel is far more positive. Management cited a 1% year-on-year drag from not repeating three “£5 off £40” coupon campaigns. In other words, it didn’t ‘buy’ sales in the same way as it did the year before. Indeed, profits have been maintained in line with expectations. More generally, the business reported growth across all formats, with strong seasonal general merchandise and clothing performances at the beleaguered Extra big-box format.

“Detractors may well point to the fact that overall market conditions were far more benign this time around and this flattered Tesco’s performance.  No matter – any improvement in the general market should be heralded as a triumph given the extent of the structural change that the industry is undergoing. The fact that there is evidently still high deflation in the market bears testament to how tough it still is for the UK grocers.

“As we stated with Morrison’s, one swallow doesn’t make a summer, but this is a positive step in the right direction – Tesco achieving sustainable volume growth in a disciplined, non-promotional manner. The road to recovery for Tesco is still a long one, but at least it seems to be venturing down the right path.”