Despite rising inflation, Britain's biggest retailer Tesco has reported its strongest quarterly sales performance in its home market in seven years. But as Ivor Bennett reports, wider concerns over a deteriorating consumer environment remain with Brexit negotiations about to begin.
In the face of rising inflation, there were fears shoppers would desert supermarkets like Tesco. but at Britain's largest retailer, the baskets are not just full, they're multiplying. Like for like sales are up 2.3 percent in the last quarter, delivering the company's fastest UK sales growth in 7 years. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "What you're actually seeing is Tesco managing to play hardball with its supply base. It's been able to insulate its customers from big increases in food prices as a result of the weakness in the pound. And customers are rewarded them by going back in large numbers." Compared to this time last year, 10 million more people are passing through Tesco's doors. Last year's so-called 'Marmitegate' is being seen as the turning point When the company refused to pass on a price hike from Unilever in the wake of Brexit. Tesco says it's been working with other suppliers too to keep price hikes to a minimum. And until now, has been able to fall back on its huge purchasing scale. It accounts for nearly a third of the market. But with Brexit negotiations about to begin, there are doubts over how long that strategy can continue. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "You have to look at how much the sterling risk evolves during Brexit negotiations and how hedged and how responsive the supply base can be for Tesco." It also has to contend with a resurgence of the German discounters. The likes of Lidl and Aldi have just recorded their fastest sales growth in two years Perhaps no wonder then Tesco's share price is down 13 percent since the start of the year.