Tesco has reported that customers are buying fewer items and switching to cheaper own-brand alternatives amid what it described as 'unprecedented increases in the cost of living'. The UK's largest supermarket said sales in the three months to 28 May fell 1.5% compared with the same period last year, when the UK was in lockdown.
Chief executive Ken Murphy said the market environment remains 'incredibly challenging', with early signs of changing customer behaviour due to inflation. Shoppers spent 14.5% less online and 0.7% less in big supermarkets, but 6.2% more in convenience stores, suggesting families are buying little and often to manage grocery bills.
The biggest sales declines were in clothing and general merchandise, while the volume of goods sold fell partly offset by inflation. Fuel sales remain below pre-pandemic levels despite competitive pricing. Murphy noted that customers are trading down to cut-price ranges on basics like bread, beans and pasta, where inflation has been high.
Murphy said it was 'hard to judge' how long food inflation would continue due to factors including energy costs, the war in Ukraine and weather effects on crops. He defended his £4.75m pay package, stating that the majority is variable and based on performance, and highlighted a nearly 6% pay rise for shop floor staff in the past year.
Overall group sales rose 2% due to strong growth in central Europe and at Booker wholesale, despite a 2.4% decline in the Republic of Ireland. The comments come as shop prices rose at the fastest rate in over a decade in May, with food inflation reaching 4.3%, and the Bank of England warning that annual consumer inflation could exceed 11% in October.
