Last checked at 
(Alliance News) - Tesco on Friday revealed slowing sales growth as the grocer starts to lap pandemic-elevated comparatives, while official figures showed Britons are shifting spending to pubs and restaurants as the lockdown is lifted.
The UK's largest supermarket chain said like-for-like retail sales for the 13 weeks to May 29 grew 1.0% year-on-year to GBP13.36 billion, and rose 8.1% on a two-year basis. For the financial year ended February, Tesco's like-for-like annual sales growth was 6.3%.
In March 2020, supermarkets began to get a pandemic-related boost as consumers stockpiled and were forced to spend more time at home due to lockdown restrictions.
In the UK, Tesco noted that two-year like-for-like growth of 9.3% includes a retained benefit of customers eating more meals at home than they were pre-pandemic. Online demand remains high, the grocer said, and there was a "particularly strong" contribution from general merchandise and clothing.
"We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic...While the market outlook remains uncertain, I'm pleased with the strong start we've made to the year and continue to be excited about the many opportunities we have to create value over the longer term," said Chief Executive Ken Murphy.
Tesco retained its profit guidance for the full-year.
Tesco's first-quarter results came as official statistics showed UK food stores suffered in May amid the reopening of the hospitality sector.
UK retail sales volumes fell 1.4% month-on-month in May, pulling back after a 9.2% surge in April. The largest contribution to May's decline came from food stores, the Office for National Statistics noted, where sales fell by 5.7%. Evidence suggests the easing of hospitality restrictions knocked sales as people flocked to pubs and restaurants after months of eating and drinking at home, the ONS said.
Tesco's results came as figures showed UK retail sales fell on a monthly basis in May as people returned to pubs and restaurants.
Retail sales volumes fell 1.4% month-on-month in May, pulling back after a 9.2% surge in April. Mid-April saw the re-opening of non-essential retail in England after months of lockdown.
Consensus, according to FXStreet, had expected growth of 1.6% for May.
The largest contribution to May's decline came from food stores, the Office for National Statistics noted, where sales fell by 5.7%. Evidence suggests the easing of hospitality restrictions diverted some spending to pubs and restaurants after months of eating and drinking at home.
Pub gardens and other outdoor hospitality reopened alongside non-essential retail in mid-April, and fully resumed in May with the restart of indoor dining and drinking.
Non-food stores saw a 2.3% rise in monthly sales, with household goods stores - such as hardware and furniture stores - reporting growth of 9.0%.
While overall UK retail sales declined in May, when combined with April average total retail sales volumes were still 7.7% higher than in March and up 9.1% on February 2020's pre-pandemic level.
Year-on-year, May retail sales surged 25% - distorted by the UK's first national lockdown a year ago.
"Following a sharp increase last month coinciding with post-lockdown reopening, retail sales dipped slightly in May. However, they remain well above both their pre-pandemic levels and those seen in March before shops reopened," said Darren Morgan, director for Economic Statistics at the ONS.
"Food stores sales suffered as feedback suggested the reopening of hospitality meant consumers took advantage of eating out instead," he noted.
Tesco shares were down 1.1% early Friday.
Here is what you need to know at the London market open:
----------
MARKETS
----------
FTSE 100: down 0.1% at 7,146.95
----------
Hang Seng: up 0.7% at 28,759.97
Nikkei 225: closed down 0.2% at 28,964.08
DJIA: closed down 210.22 points, or 0.6%, at 33,823.45
S&P 500: closed down 1.84 points at 4,221.86
Nasdaq Composite: closed up 121.67 points, or 0.9%, at 14,161.35
----------
EUR: down at USD1.1896 (USD1.1920)
GBP: down at USD1.3873 (USD1.3933)
USD: down at JPY110.09 (JPY110.30)
Gold: up at USD1,783.10 per ounce (USD1,768.00)
Oil (Brent): down at USD72.69 a barrel (USD74.06)
(changes since previous London equities close)
----------
ECONOMICS AND GENERAL
----------
Friday's Key Economic Events still to come
1000 CEST EU euro area balance of payments
0930 BST UK Bank of England quarterly inflation attitudes survey
----------
German producer price growth picked up in May largely due to energy and intermediate products. Month-on-month producer price growth was 1.5% for May, nearly double the rate of 0.8% recorded for April. Annually, prices surged 7.2% in May as they picked up steam from April's 5.2% jump. Both readings were well ahead of consensus, which had seen monthly growth of 0.7% and an annual price increase of 6.4%, according to FXStreet. The annual price gain was the largest since October 2008, while the monthly rise was the fastest since July 2008.
----------
BROKER RATING CHANGES
----------
JPMORGAN RAISES DIAGEO TO 'NEUTRAL' (UNDERWEIGHT) - PRICE TARGET 3,500 (2,700) PENCE
----------
JPMORGAN RAISES HSBC TO 'NEUTRAL' (UNDERWEIGHT) - PRICE TARGET 440 (400) PENCE
----------
HSBC RAISES EASYJET TO 'BUY' (HOLD) - PRICE TARGET 1,200 (1,000) PENCE
----------
HSBC RAISES WIZZ AIR TO 'HOLD' (REDUCE) - PRICE TARGET 4,500 (4,000) PENCE
----------
HSBC RAISES RYANAIR TO 'BUY' (HOLD) - PRICE TARGET 19.00 (16.75) EUR
----------
COMPANIES - FTSE 250
----------
Inchcape said it expects to deliver 2021 profit substantially ahead of market consensus, amid good demand. The automotive distribution, retail and services company said encouraging trends across the business have continued and its performance to date has exceeded internal expectations. It noted both an uptick in demand and margin resilience. While there is still uncertainty over the second half, both in relation to the pandemic situation and also due to semiconductor shortages, it expects a strong first half performance to underpin its full-year results. It expects to "significantly" beat the market consensus figure for pretax profit, before exceptional items, of GBP216 million. Inchcape posted pretax profit before exceptionals of GBP129 million for 2020, which was down 61% on the GBP326 million reported for 2019.
----------
COMPANIES - MAIN MARKET AND AIM
----------
Kerry Group said it has agreed to sell its Consumer Foods' Meats & Meals business in the UK and Ireland to Pilgrim's Pride for EUR819 million. However, it confirmed that it will retain its dairy business. The Meats business is a manufacturer of branded and private label meats, meat snacks, food-to-go and meat-free products, with its brands including Richmond, Fridge Raiders and Rollover. The Meals business primarily serves the UK market and "specialises in authentic ethnic chilled and frozen ready meals, multi-cuisine ready to cook ranges, and home delivery meals under the Oakhouse brand." The Meats & Meals business achieved revenue of EUR828 million and pretax profit of EUR63 million for 2020. Tralee, Ireland-based Kerry plans to use the sale proceeds for the ongoing strategic development of the Taste & Nutrition business, as well as for general corporate purposes. The deal is expected to close in the final quarter. "Following today's announcement, we will separate and realign the remaining dairy-related activities within the Consumer Foods Business. The strategic review of the dairy business has been completed, and there will be no disposal of the dairy business at this time," it added.
----------
Auction Technology Group late Thursday said it intends to acquire Platinum Parent, the holding company of North American arts and antiques marketplace LiveAuctioneers, for an enterprise value of USD525 million. The London-based online auction operator said it will finance the acquisition through debt financing of around USD204 million and USD19 million through key LiveAuctioneers management rolling no less than 35% of their existing holding into Auction Technology shares. The remainder will be financed through proceeds generated from a placing of 20.0 million shares. Early Friday, Auction Tech confirmed that JP Morgan Securities and Numis Securities placed the shares at 1,220.00p, raising GBP244.0 million. The placing shares represent 20% of the company's total prior to their issue, and the price was a 6.6% discount to their close of 1,306.00p on Thursday. The stock was down 0.6% at 1,298.00p early Friday. Auction Tech listed on the Main Market in February at 600p per share.
----------
COMPANIES - GLOBAL
----------
Chinese technology investor Tencent Holdings has injected GBP35 million into a Bristol-based technology company, called Ultraleap, which uses ultrasound waves to simulate the sense of touch, Sky News reported on Thursday. Image Frame Investment, a subsidiary of Shenzhen-based Tencent, is investing GBP35 million into Ultraleap in the first phase of the company's series D fundraising. "Tencent's investment brings a major strategic partner onto Ultraleap's shareholder register ahead of a likely initial public offering in the next couple of years," Sky commented. Ultraleap uses haptic technologies to allow people to experience physical sensations without touching surfaces.
----------
Friday's Shareholder Meetings
Beowulf Mining PLC - AGM
boohoo Group PLC - AGM
Chariot Oil & Gas Ltd - GM re fundraise
City Of London Investment Trust PLC - AGM
Drumz PLC - AGM
Gulf Keystone Petroleum Ltd - AGM
Katoro Gold PLC - AGM
Location Sciences Group PLC - AGM
Princess Private Equity Holding Ltd - AGM
Synairgen PLC - AGM
Trinity Exploration & Production PLC - AGM
UK Commercial Property REIT Ltd - AGM
----------
By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
