Tesco stutters as the reality of a no-deal Brexit looms over us

The supermarket claimed a 0.4% rise represented a ‘strong start’ – well the wheels are hardly falling off, but there’s still plenty to worry about given the Tories’ latest threats, writes James Moore

No longer flying? Tesco's sales growth was subdued for the first three months of its financial year (PA)

Has supermarket superman David Lewis lost his ability to fly? The Tesco boss, who has overseen an impressive revival at the sector’s big dog, looked at bit more Clark Kent after the latest update.

Tesco managed like-for-like sales growth of just 0.4 per cent for the three months ending 25 May. That figure, excluding the contributions from new openings and the negative impact of the closure of Tesco Direct, represents a sharp slowdown from the 1.7 per cent recorded for the previous quarter.

“We’ve had a strong start to the year,” the CEO boldly declared as he unveiled the number, which on the face of it looked like a case of him over-egging the Tesco Finest creme brulee.

Retail analyst Nick Bubb was one who raised an eyebrow in response. “Rather over the top,” is how he described the statement, not without justification –because if that’s what Mr Lewis says on the back of 0.4 per cent, what’s he going to come up with if the group starts flying again? “I mean, yowza. We’ve just done 2 per cent and I’m over the moon, baby!”

Well, maybe not.

But while Tesco’s performance was less than stellar, the wheels are hardly falling off the revival he has overseen. For a start, the comparatives were very tough. The weather was warm rather than soggy over the same period in 2018, and both the royal wedding, which some people got terribly excited about, and the World Cup helped to drive sales.

Mr Lewis described the current retail market as “subdued”, something borne out by other data, including the regular Kantar survey of more than 30,000 shoppers from which the researcher derives its market share data.

Its latest missive showed Tesco is outperforming its rivals among the traditional big four supermarket groups despite the tough operating environment. Discounters Aldi and Lidl are still opening new stores wherever they can find suitable premises while Amazon has just extended its same-day delivery partnership with Morrisons, adding five more cities. Further additions are promised. The move sees the pair throwing down a gauntlet to the entire sector. The delivery wars are on.

Against that backdrop, Tesco’s latest numbers might not represent the strong start claimed for them by Mr Lewis. But they do show that the group is holding its own, which helps to explain why the City greeted them with equanimity.

The real fly in the ointment is the cause of that subdued market Mr Lewis referenced, namely Brexit.

Shoppers’ confidence is low in part because they’re starting to get worried about no deal again, and no wonder given the way the Conservative Party is carrying on.

If you want a real scare, pay close attention to what Mr Lewis said about stockpiling. We already know that you can’t do it with fresh food, and we import about half the fresh food we eat. But the reserves of what Tesco could set aside as the last cliff edge loomed have largely been unwound. It’ll be an awful lot harder to repeat the trick ahead of the next one at the end of October, because the warehouses will be full to the rafters ahead of what could be a cold Christmas indeed.