Tesco sales growth continues as Booker deal boosts prospects

Tesco's group sales up 1.8% in its fiscal first quarter

The strong performance is timely as Tesco faces increased competition in a sector already reshaped by inroads made by German-owned discounters Lidl and Aldi.

Like-for-like sales in the combined UK & Republic of Ireland business, for the 13 weeks ended 26 May, jumped by 3.5% as the UK's largest retailer looked to map out new opportunities following its merger with wholesaler Booker.

"Performance improved through the quarter (after taking the timing of Easter into account), recovering from the impact of adverse weather conditions experienced in March", Tesco said in its quarterly report. "We remain well-placed to serve our customers better and deliver on our medium-term financial ambitions", said Dave Lewis, chief executive, Tesco.

That was a tenth straight quarter of growth and compared to analysts' forecasts in a range of up 1.7 percent to 2.5 percent and growth of 2.3 percent in the previous quarter.

Lewis's boldest move was to buy Booker for 4 billion pounds ($5.3 billion) to expand into supplying restaurants, cafes and local shops.

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'The latest market data from Kantar Worldpanel shows that Tesco remains streets ahead of its competitors with a 27.7% grocery market share in Great Britain.

Accustomed to being the biggest beast in the industry, Sainsbury's proposed 7.3 billion pound ($9.7 billion) takeover of Walmart's Asda would push Tesco down into second place. Lewis said Tesco planned to submit its thoughts on the deal to United Kingdom regulators.

The supermarket's general merchandise sales dragged on total sales growth, although like-for-like clothing sales ticked up 1.7 per cent.

The supermarket revealed in its quarterly trading update that its Tesco Magor distribution centre in South Wales is stocking 3,000 Booker lines and Tesco Middleton distribution centre, Manchester, will help to ensure Booker is able to meet demand over the busy summer trading period.

Booker customers around Manchester and the South West are benefiting from more responsive deliveries as a result of the Tesco deal.

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