Tesco growth slows, still best prospect of big four

Tesco saw limited growth

According to market analyst Verdict Research, despite a lack of growth in the first quarter results, Tesco is still the "best product" amongst Britain's top four supermarkets; Sainsbury's, Morrison's and Asda.

The leading supermarket chain has seen its UK sales growth almost ground to a halt in the last three months, with like-for-like sales, excluding petrol, up just 1.1 percent in the three months to 30 May.

When adjusting for this year's higher rate of VAT sales, growth slowed to just 0.1 percent.

Success overseas

Part of Tesco's security lies overseas, where sales have increased in Asia (15.4 percent), mainland Europe (7.4 percent), and the US (37.8 percent).

"Though UK growth has slowed markedly over the last three months, much of this slowdown can be attributed to easing food inflation, which was particularly high a year ago,"' said Malcolm Pinkerton, senior retail analyst at Verdict.

"Tesco continues to perform well in a challenging market by cleverly catering for a broad spectrum of consumer budgets, while focusing on building loyalty through its Clubcard," Malcolm Pinkerton added.

'Tesco has the best prospects of the 'big four' grocers, especially given the significant potential still remaining internationally, especially in Asia and the United States. While competitive pressures will intensify in the UK, sufficient opportunities remain in non-food and overseas to ensure long term growth

"Philip Clarke will take the reins of a business is a very strong position, and his experience with international markets will ensure the opportunities available from this powerhouse of growth will be maximised."

Caroline Gulliver, analyst at Execution Noble, said: "Investors may want to wait until next week's Budget for clarity on the potential imposition of VAT on food, which is unlikely in our view, but there could be an extension of VAT to certain unhealthy categories of food - the 'fat tax'."

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