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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 18 April, 2018

​Tesco turns the corner

​Tesco has released impressive preliminary results for its financial year, beating forecasts with a pre-tax profit leap of almost 800% to £1,298m. The results are based around the success of the UK division, as LFL sales increased 2.2%, supported by a stronger performance in the second half of 2017. In particular, Tesco has benefited from consistent growth in fresh food, own-brand products, and also managed to add an additional 260,000 customers. 

The UK’s largest retailer has seemingly shrugged off macro-economic issues that have affected the majority of UK retailers, as well as successfully fought intense competition from the discount operators. Tesco’s results provide further evidence of the retail excellence required to thrive in the current market conditions – notable strategies include revamping supplier terms, improving employee pay and championing the customer by lowering prices and introducing new own-label brands. And while the pre-tax profit leap may be a one-off, Tesco looks well placed to maintain its position at the forefront of UK retail, and weather the ongoing structural change that is redefining the market. 

This redefinition of the Retail market was illustrated by research released this week, by PwC. According to the research, an average of 11 stores opened every day in 2017, while at the same time, an average of 16 high street stores closed, resulting in a net reduction of 1,772 stores over the year. While sectors such as fashion, which saw the largest net reduction, are realigning to the future retail landscape, there are also healthy levels of ‘re-occupancy,’ and evolution of the use of space. In addition to coffee shops, nurseries and nail salons, the athleisure, cosmetics and convenience food sectors are in expansion mode, as newer entrants and younger brands take the ‘shake out’ as an opportunity to pick up stores. UK Retail is undoubtedly facing headwinds, but retailers are slowly waking up to the challenge and taking the necessary (often painful) steps towards a vibrant retail future.

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