Tesco sees signs of changing shopper behaviour as inflation bites

The grocery giant said like-for-like sales slipped 1.5% year on year to £9.88bn in its core domestic market over the first quarter, but that it increased market share by 37bps, “outperforming on both value and volume”.

Tesco said year-on-year performance was “impacted by annualisation of lockdown last year, most notably in general merchandise, clothing and online, partially offset by inflation”.

In the UK and Republic of Ireland, one-year like-for-likes rose 1.5% to £12.60bn in the period to May 28. At group level, like-for-likes rose 2% year on year – or up 9.9% on a three-year basis – to £13.57bn, helped by a strong performance from wholesaler Booker as the catering industry bounced back and inflation-driven growth in central Europe.

Tesco reported that in the UK the overall distribution of Aldi Price Match and Low Everyday Prices products rose 19% year on year and that it was sustaining the “largest improvement in quality and value perception of any food retailer in the market versus pre-pandemic”.

Tesco chief executive Ken Murphy said: “Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market. 

“Our material and ongoing investment in the powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices is removing the need for customers to shop elsewhere. 

“Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment.

“Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.”

• Sainsbury’s has added more products to its Aldi price-matching scheme. Tesco’s rival said it will match 150 of its highest-volume fresh items with the value grocer, bringing the total number of products included to 250. The initiative is part of a £500m price investment over two years.