By Saabira Chaudhuri
LONDON--Britain's largest retailer, Tesco PLC, delivered a
stronger-than-expected performance for the first quarter in a sign
that its turnaround plan is beginning to bear fruit.
The company, whose annual meeting takes place Friday, reported
U.K. same-store sales excluding petrol in the three months through
May 30 fell 1.3% from a year earlier, which is better than the 2.3%
drop forecast by analysts at Barclays. International sales dropped
by 1%, leaving Tesco with an overall decline of 1.3%.
"It's the U.K. that matters for Tesco's long-term health and
here Tesco delivered a handsome beat," said Exane BNP Paribas
analyst John Kershaw. "Tesco evidently is gaining traction with
customers."
U.K. volumes rose 1.4% as Tesco said 180,000 more customers
shopped with it.
Under new Chief Executive Dave Lewis, Tesco has been working to
regain some of the traction it had before a period of slumping
sales hammered profit, while the company's reputation was tarnished
by an accounting scandal. In April, Tesco reported the steepest
ever full-year loss for a British retailer amid a raft of charges,
capping the most tumultuous year in its 96 year history.
On Friday, Tesco indicated that it may be turning a corner.
"Our first quarter results represent another step in the right
direction, " Mr. Lewis told reporters. "Clearly customers are
noticing that we're investing in the offer."
The company cut prices on more than 300 products during the
quarter and has reduced the number of lines in stores by up to 20%
as it works to simplify its offering and make space for the most
popular products.
Looking forward, Mr. Lewis said he expects to see deflation for
the foreseeable future and warned that there is "still an awful lot
of volatility out there as we change quite a lot in our
business."
In Asia, Tesco posted a 3% decline in same-store sales as its
two largest markets, Korea and Thailand, saw this metric decline by
over 3% and 2% respectively.
Tesco didn't offer any updates on the pending sale of its data
unit Dunnhumby or on whether it will sell its South Korea business.
"When we have something more definitive to share, we'll share it
but we're not going to get drawn into speculation," said Mr.
Lewis
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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