Tesco reported sales growth of 12.2 per cent for the quarter, with an increase of 12.3 per cent in the UK alone, reflecting the company's continued move to reduce prices. In particular, Tesco highlighted its efforts to keep its petrol prices down during the current period of rising oil prices.
But Tesco has invested in UK prices across the board, not just at the petrol pump. Like-for-like sales were up 9.8 per cent during the quarter, with 7.5 per cent of this coming from products other than petrol.
The company did its international pretensions no harm during the quarter either, with international sales rising by 18.2 per cent (or 11.9 per cent at actual exchange rates), although almost all of this came from the C-Two acquisition in Japan a year earlier.
Excluding Japan, international sales growth in the quarter was broadly similar to the first half, but a number of new store openings planned for the final quarter are expected to help the company end the year on a high. Some 1.4 million square feet of new selling area, representing almost 50 per cent of the total space planned to open outside the UK during the current financial year, will begin trading in the fourth quarter.
Tesco's apparent ability to react more rapidly than its rivals to the economic changes in the UK and cut its prices accordingly - helped by the sheer size of its pockets, of course - clearly makes it hard for analysts to assess its performance - the third quarter figures were well ahead of consensus forecasts.
"We are edging up our earnings forecasts for the full year, although a forecast for underlying pre-tax of £2,026mn still looks like a cautious one, notably if Tesco can maintain this kind of top line momentum, and leaves some room for any step-up in price investments over the Christmas trading period," said Goldman Sachs, suggesting that further unexpected gains could come in the final quarter.
The analysts estimate that underlying like-for-like sales growth at Tesco (i.e. excluding the impact of the price cuts announced by the firm) is running at nearer 8 per cent a quarter. Furthermore, they said, while Tesco chose to highlight the excellent performance from petrol sales, this should not detract from an equally impressive estimated 5 per cent gain in food sales, albeit helped by the acquisition of a number of former Safeway stores.
The only fly in the Tesco ointment, according to Goldman Sachs, appears to be central and eastern Europe, where even the mighty Tesco cannot compensate for sluggish economic conditions. Yet even here, the situation is expected to improve dramatically in Q4 when the new stores come on line.
The latest till roll data from TNS Superpanel shows just how effective Tesco is at pulling away from the competition. Already market leader in 2002, its share of total grocery sales in the UK during the first 12 weeks of that year was estimated at 24.6 per cent, around 7 per cent ahead of then number two, Sainsbury, and some 9 per cent more than Asda. In the latest 12-week period, to 7 November 2004, Tesco accounted for 28.3 per cent of total grocery sales, nearly 12 per cent ahead of Asda, the new number two, and 13 per cent ahead of Sainsbury.
While Sainsbury's widely chronicled woes explain its fall from grace, Asda's performance over the last few years (helped by its acquisition by the world's number one Wal-Mart, itself no stranger to investing in prices), has been impressive in its own right.
Yet even it has failed to narrow the gap with the market leader, as Tesco's four-pronged approach of focusing on the UK, international markets, non-food sales and retail services effectively allows it to compensate for downturns in one sector with strong performances elsewhere.