Tesco outshines rivals as it proves most resilient to discounters and deflation

Tesco today outshone its supermarket rivals by proving to be the most resilient to the rise of the discounters and falling food prices in the last three months.

In the latest sign that recovery at Britain’s largest supermarket is taking hold, data from Kantar Worldpanel showed Tesco sales fell 1% in the 12 weeks to May 22. That compared with a 1.2% fall at Sainsbury’s, Morrisons’ 2.1% drop and Asda’s dismal 5.1% decline, and came as food prices fell 1.5%.

The news sent Tesco shares up 9p to 166p, Sainsbury’s 4.3p lower to 264.2p and Morrisons down 1.6p to 196.5p.

In April Tesco posted its first quarterly rise in same-store sales for three years and returned to profit following 2015’s record loss. But boss Dave Lewis, who was parachuted in to revive the group in 2014, has warned that Tesco’s turnaround could be rocky due to the “deflationary and uncertain” backdrop.

Kantar said Sainsbury’s sales were hit by a move away from multi-buys, while Morrisons was affected by store disposals. Asda, which has invested £1.5 billion in cutting prices, remained under pressure from Aldi and Lidl.

The German firms remained the fastest growing in the sector, with sales up 14.2% and 11.4% respectively, but Kantar said customers were not completely deserting traditional players.

Edward Garner, director at Kantar Worldpanel, said 94% of Aldi and Lidl shoppers still visit one of the four every four weeks.

“However, consumers’ spend is increasingly being shared with other growing outlets which also include Waitrose, the Co-operative and Iceland and average household spend for the big four has dropped by 2.9%,” Garner added.

Waitrose’s market share hit an all-time high of 5.3% as sales grew by 2.1%.