Can Tesco maintain the lead?

Tesco

If you walk into any supermarket, it makes you question whether there's really a recession going on. The shelves are still stocked, there's people everywhere, and there's queues at the checkouts.

Chief executive of Tesco, Sir Terry Leahy, has now said that the supermarket chain is "well-placed for the global recovery" after reporting solid results. Britain's biggest retailer'spre-tax profits for the six months to the end of August came in at GBP£1.42 billion, which was up 1.5 percent on the same period last year. The British supermarket group runs over 4300 shops in 14 countries.

Group sales rose 8.3 percent to GBP£30.4 billion while like-for-like sales in the UK - which excludes new stores - grew 2.7 percent. In the same six-month period Tesco announced it would also create a further 6500 jobs.

Tesco's statement said its strategy had "delivered pleasing growth in challenging times."

The supermarket said that its Discount Brands, which launched a year ago, and extra investment in its "Clubcard" scheme was working. In additono the chain reported it was "starting to see significant improvement in our relative performance versus our main competitors."

It also added that the strongest response to the Clubcard investment had been more regular visits from customers who had previously been occasional shoppers at Tesco. The Clubcard gives customers an extra incentive to shop at the supermarket. Sainsbury's has a similar scheme with its Nectar card.
Market research firm Nielsen said this month that Tesco's sales had outperformed Sainsbury's in the four weeks to 5 September for the first time for a year.

In the early stages of the recession, Tesco had been losing market share to rivals such as Sainsbury and Asda and to discount chains such as Aldi and Netto.

Sir Terry told the BBC that he was expecting a "slow and steady" economic recovery.

"The recovery is happening - we're through the low-point - obviously helped by growing signs of stability from the financial sector," he said. "You can see consumers gradually gaining confidence and being prepared to spend again."

Back in July 2008, Tesco announced that it would be buying the 50 percent of Tesco Personal Finance that it did not already own from Royal Bank of Scotland. It has now announced that it will change the name to Tesco Bank.

The unit - which made sales of GBP£420 million in the six-month period - is due to begin offering current accounts soon, although no date has yet been set. Tesco has also quashed the rumours that said it was considering buying Northern Rock from the government. The firm's finance director, Laurie McIlwee, told the BBC: "We're not."

Sainsbury's, meanwhile, Britain's third-biggest grocer, is expected to post a 5.6 percent rise in underlying sales on Wednesday.

After years of faster growth, Tesco's same-store sales in the UK have lagged behind smaller rivals such as J Sainsbury Plc over the past 12 months. Tesco fell 3.7 pence, or one percent, to 387.7 pence at 9:09 a.m. in London trading. The stock has fallen four percent in the past year, compared with Sainsbury's 3.6 percent gain and William Morrison Supermarkets Plc's 8.2 percent climb.

The US unit made a trading loss of 85 million pounds in the first half, and will likely report a full-year loss similar to last year's US$259 million, the company said.

"In international, the markets with the greatest growth potential for the long-term have been some of the hardest hit in the short-term," Chief Executive Officer Terry Leahy said in a statement.

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