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Tesco sees digital sales up 74% in two years as profits climb, but HGV and fuel problems could offer ‘perfect storm’

Tesco: working on value

Tesco has seen online like for like sales rise 74.1% compared to H1 2019 and up an impressive 2.3% on H1 2020 as the retailer logs a strong performance with sales topping £27bn in the first half.

Group sales up 3% at a constant rate as recovery was evident in the UK and Republic of Ireland, with two-year like-for-like sales growing by 9.1%, and Tesco Bank also returned to profit following revenue growth of 12.2%.  Total adjusted retail operating profit increased by 16.6% at a constant rate to £1.386bn.

Online, the company has seen sales continue to rise as online grocery shopping trends from the pandemic continue. The retailer’s Clubcard loyalty programme has also had a boost from this digital swing, seeing 20 million users, 6.6 million of which are app-based.

Ken Murphy, CEO, says: “Against a backdrop of profound change, Tesco has many unique advantages.  The scale and reach of our store estate and online operations are unmatched in the UK.  Our ability to reward loyalty through Clubcard enhances our relationship with customers.  Our world-class food retail expertise combined with our strong supplier partnerships ensures we can offer our customers great value and quality, removing reasons to shop elsewhere.  Together, these strengths mean that Tesco can anticipate and respond to changes in the market, meeting customers’ needs better than anyone.”

However, analysts warn that Murphy’s plan to “accelerate growth and generate between £1.4bn and £1.8bn retail free cash flow per year”, could be stymied by a combination of external factors around supply chain issues.

Neil Shah, Director of Research at Edison Group, warns: Looking ahead, the combination of the current driver, labour and fuel shortages as well as increasing inflation could represent something of a perfect storm for the supermarket sector in the build up to Christmas. Investors will keep a close eye on whether the Group’s strategic priorities can be fulfilled in the short term as it deals with the more immediate issue of keeping shelves stocked. However, Tesco reiterated confidence in its supply chain and fulfilment infrastructure and this strong performance in the first half leaves it well placed as we enter peak retail period.” 

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