Supermarket CEO warns capacity for storing fresh food for UK would be ‘very, very limited’

This article is more than 1 year old

This article is more than 1 year old

Tesco is set to take action after Christmas to fend off food shortages unless the government has cut a Brexit deal that ensures the free flow of goods from Europe.

Dave Lewis, the chief executive of the UK’s biggest supermarket chain, said consumer confidence had already been affected by uncertainty about the details of the country’s new relationship with the EU, prompting Tesco to cut prices and expand its range of cheap foods to tempt shoppers in.

But he said the “biggest single challenge” would be the impact of a no-deal exit on deliveries of fresh food from the continent. “The possibility of stockpiling fresh food is very, very limited,” he said.

He said Tesco was discussing contingency plans with its suppliers and “if it came to it, we could take stockpiling of dry goods”, but he said plans would not “become real” until after the busy Christmas trading period. “It really is still wait and see,” he said.

Lewis’s comments came as he announced that Tesco had increased its UK sales at the fastest pace in at least a decade, boosted by strong growth at its new Booker wholesale chain.

Tesco’s established stores in the UK and Ireland increased sales by 4.2% in the three months to the end of August, a step up from 3.5% in the previous quarter.

Growth at the Tesco chain improved to a healthy 2.5%, but Booker increased sales by just over 15%, partly helped by access to Tesco’s distribution network, enabling it to improve deliveries to its independent retail clients.

Lewis said: “We are firmly on track to deliver our medium-term ambitions and are continuing to improve the quality and value of our offer for customers in all of our markets.”

Quick guide UK's top three supermarkets Show Hide 1) Tesco Head office Welwyn Garden City

Chief executive Dave Lewis

Stores 6,809 worldwide/3,400 UK

Employees 460,000/310,000 UK

Market share 27.6%

Annual sales £51bn

Profit last year £1.3bn

Shopper visits a week 79m (worldwide) 2) Sainsbury’s Head office London

Chief executive Mike Coupe

Stores 1,414 grocers (+ 800 Argos)

Employees 195,000

Market share 15.8%

Annual sales £29bn

Profit last year £503m

Shopper visits a week 26m 3) Asda Head office Leeds

Chief executive Roger Burnley

Stores 642

Employees 165,000

Market share 15.6%

Annual sales £22bn (2016)

Profit last year n/a

Shopper visits a week 18m

He said trading was going well at its two Jack’s discount stores, which opened last month. Two more are due to open on Thursday – in St Helen’s and Edge Hill, near Liverpool.

But shares in the UK’s biggest retail group closed down 8.5.% at 215p, after problems at its Thai and Polish operations meant that operating profits over the first half fell about £45m short of expectations, at £933m.

Investors were spooked as sales at Tesco’s Thai chain fell 7% at established stores and profits tumbled nearly 30% as the company suffered from the issue of government welfare vouchers which cannot be spent in its supermarkets.

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In Poland, Tesco closed 18 loss-making stores and said it would close at least a further 13 as it struggled to reduce costs after new laws stopped retailers trading on some Sundays.

Lewis hinted that Tesco would consider selling off the Polish business if it remained in the red. He said the company’s view of all of its assets was “if we can’t make value you’ve got to find someone who can”.

Total sales at the group rose nearly 13% to £28.3bn. Pretax profits rose 2% to £564m.