Shares in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) rose by more than 2% in early trade this morning, following eagerly anticipated third-quarter results.
This comes despite the supermarket revealing that total like-for-like sales decreased by 1.5%, with management blaming the setback on the UK economy, citing a “weaker grocery market” due to “continuing pressures on UK household finances”.
Indeed, the change in performance from Q2 to Q3 was reported as “broadly in-line with the weaker growth seen in the UK grocery market as a whole”. Management also offered up the statistic that, in real terms, the average spending power of a typical UK household is around 10% below its 2007 peak.
Elsewhere, under the leadership of Philip Clarke, the company’s closer multichannel focus saw record online delivery orders, while management reported positive like-for-like sales from the 1,600 Tesco Express stores. Clarke continued:
“The actions we have taken to position the business for the future – including the work currently underway to transform our general merchandise offer and our decision to significantly reduce the amount of new space we open – are also holding back our sales performance in the short-term.
“We are confident that our strategic priorities – strengthening the UK business, establishing multichannel leadership and ensuring capital discipline – are the right ones and that they will drive long-term value and returns.”
Internationally, conditions “remain challenging”, with like-for-like sales in Asia declining by 5.1%, partly driven by new regulatory restrictions on opening hours. There were signs of improvement in Turkey and Poland, though, while Thailand did see underlying improvements although these were more than offset by a tougher comparative and “increasingly challenging conditions”.
Some investors will be heartened by today’s interims, as the setbacks do not appear to be of Tesco’s own makings; indeed, Clarke’s comments on the company’s actions sounded positive for the long term — and the long term is where investors ought to focus on.
