British Supermarket Tesco a Corona-virus Success

British Supermarket Tesco a Corona-virus Success

British supermarket giant Tesco announced Friday that its first-quarter sales jumped eight percent, boosted by rocketing online purchases as people switched to grocery deliveries during the nationwide coronavirus lockdown.

Total sales excluding petrol surged to £13.4 billion ($16.6 billion, 14.8 billion euros) during the company’s first quarter — the 13 weeks to end-May — compared with a year earlier.

Britain’s biggest retailer said in a trading update that customers shopped less often but purchased more goods.

The bumper performance came after the government imposed a lockdown on March 23 in a bid to halt the COVID-19 outbreak. Restrictions began to be eased this month.

Online sales soared by a staggering 48.5 percent in the reporting period as the company ramped up its delivery capability to cope with booming demand from customers staying at home.

The online business saw sales zoom by more than 90 percent in May alone, the company added.

“Through a very challenging period for everyone, Tesco colleagues have gone above and beyond, and I’m extremely proud of what they’ve achieved,” said Chief Executive Dave Lewis.

The results marked the final update fronted by Lewis, who is leaving for personal reasons and will be replaced by Walgreens Boots Alliance executive Ken Murphy in September.

“We doubled our online capacity to help support our most vulnerable customers and transformed our stores with extensive social distancing measures so that everyone who was able to shop in store could do so safely,” Lewis noted.

“The costs of doing this have been significant and only partly offset by business rates relief and increased volume. We see the balance as an investment in supporting our customers at a time when they need it most.

Tesco added Friday that it has grown its online business “as quickly as possible” in response to “significantly increased demand”.

– ‘Pandemic remains central theme’ –

The retailer is now delivering more than 1.3 million online orders per week, with a total of 12.6 million filled during the first quarter.

Around one quarter of the group’s online division comprised its click-and-collect service, whereby customers pre-order on the website or app and collect groceries from stores.

“As a result of the changes we have made, our online grocery business has grown from about nine percent to over 16 percent of our total UK sales,” Tesco said.

The trading update was well received on the London stock market as investors shrugged off news of rising bad debts at Tesco’s banking division.

Shares rallied 1.2 percent to stand at 229 pence on the British capital’s FTSE 100 index, which was 1.63 percent higher at 6,247.43 points.

“The pandemic remains the central theme and Tesco has certainly stepped up to the plate in response,” commented Richard Hunter, Head of Markets at online brokerage Interactive Investor.

“Tesco has clearly responded rapidly to the challenges emanating from this unique set of circumstances while also managing to keep a hand on the strategic tiller.”

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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