Tesco’s retail sales grew at a slower rate in Q1 as COVID boost started to fade

Tesco plc (LON: TSCO) said on Friday its comparable retail sales grew at a slower rate in the first quarter as the COVID-driven boost started to fade. The company, however, kept its full-year guidance unchanged.

Tesco’s digital sales climbed by 22% in the first quarter

Tesco reported £13.36 billion of retail sales in the quarter that concluded on 29^th May that represents a 1.3% growth on a year over year basis. Comparable sales in the UK noted an annualised increase of 0.5% in the first quarter. In comparison, like-for-like sales were up 7.7% from the previous year in fiscal 2021 as a whole.  

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The British multinational’s financial numbers were significantly better than the first quarter two years ago (pre-pandemic). Digital sales remained strong in Q1 with a 22% growth on a year over year basis and a massive 82% increase compared to fiscal 2020. Weekly online orders in the first quarter stood at 1.3 million.

Other notable figures in Tesco’s quarterly results on Friday include a 9.2% growth in comparable sales at Booker (wholesale arm), a 68% increase in like-for-like sales from catering, and a 10% decline in sales from bank operations.

In separate news from the United Kingdom, sources confirmed that HSBC will announce the sale of its French retail banking operations to Cerberus on Friday.

Retail free cash flow and profitability to increase significantly in fiscal 2022

Reiterating its guidance for fiscal 2022, UK’s largest supermarket chain said retail free cash flow and profitability will improve significantly this year as COVID-19 related additional costs won’t be repeated. Fiscal 2022 operating profit, it added, will return to levels seen in fiscal 2020.

Sales volumes, however, are likely to take a hit as COVID-19 restrictions continue to ease on the back of vaccine rollouts. Commenting on the Q1 report, however, CEO Ken Murphy said:

“We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic.”

Tesco shares are currently more than 3% down on the intraday chart. Including the price action, the stock is now exchanging hands at 224 pence per share. In comparison, it had started the year at a much higher 300 pence per share.

Tesco performed downbeat in the stock market last year with an annual decline of close to 10%. At the time of writing, it is valued at $17.31 billion and has a price to earnings ratio of 23.80.