Tesco has delivered a respectable quarterly result this morning, achieving like-for-like growth at home despite the wider deflationary environment. This demonstrates how far the retailer has come from the Clarke era of just a few years ago.
This result is in the wake of the British grocer selling its grocery business in Turkey to a local competitor, Migros for $30 million. Tescos has also found a buyer this month for Giraffe, the chain of restaurants in bought three years ago, which has been making losses.
The exit from Turkey is encouraging, freeing as it does resources to focus on further improvement in the UK, a business that accounts for the vast majority of sales and profits – more so now than at any time in almost a decade.
On today’s TESCO Q1 results, David Gray, Senior Retail Analyst at Planet Retail, commented:
“As expected, Tesco has reported another domestic like-for-like increase driven by some decent volume growth across the core food business. This is encouraging news, considering Tesco has been putting major efforts into improving the proposition through range enhancements, price investments and store refreshes (where it is taking a more mission-based approach to store layout). Upward-facing like-for-likes also come at a time when deflation is still an issue for the wider industry, showing just how far Tesco has come.
“That said, Asda’s decision to focus squarely on market share rather than profitability as a performance indicator could entail some headwinds for Britain’s biggest grocer, although, given its present woes, it’ll undoubtedly take some time for Asda to return to full strength.
“The big story of the quarter is that Tesco is now free of the shackles of the failing Turkish business – an operation which, for years, has been a drain on vital group cash and management resources. The disposal will liberate resources to sustain focus on domestic improvements.
“However, this exit, alongside Korea, does leave Thailand and Malaysia looking increasingly isolated among Tesco’s portfolio. The latter has limited growth potential due to restrictive regulation. Therefore, longer term we still see some scope for further international rationalisation.”