Speaking on a conference call following the publication of Tesco’s full-year results this morning, Lewis said: "We don’t welcome inflation – but the reality is there is pressure there. In Q4 we saw inflation around 0.5 – 0.6%. But we’re passing on less inflation into the marketplace than any of our competitors."
Data from IRI released this week showed that while inflation had started to make itself felt in the UK grocery sector, this was almost entirely as a result of fewer items being sold on promotion, with base prices not yet going up. In its results statement, Tesco said it had reduced the proportion of goods sold on promotion to 32%.
Despite this, Lewis said the number of products bought in the average shopping trip was going up, and that this was the biggest reason for the 0.9% like-for-like growth in its UK sales – the first such growth since 2010. "The thing that has grown most of our business is increasing the volume in the basket," he said. "That’s where our price reductions have really started to take effect."
While Lewis had sought efficiencies across the business, including staff, with the aim of cutting costs by £1.5bn, he said that this had not affected the customer experience. "We’ve created a lot of jobs that are much more customer-facing," he said. "The number of hours we’re able to offer our colleagues that are customer facing are up year-on-year."
Phil Dorrell, consultant at Retail Remedy, said the results showed Tesco was a "retailer with its finger on the pulse", and highlighted the introduction last year of Tesco’s "farm brands" as adding to the value for money it offered consumers.
But he warned that Lewis’s cuts, such as to 24-hour store opening, and stacking shelves in the evening rather than overnight, were not without risk. "We are spotting cracks in store standards and availability as a result," he said. "Lewis must be careful not to cut too deep too quickly."
And Philip Benton, senior analyst, Euromonitor International, warned that while positive at face value, the results reflected a complex economic picture.
"Tesco posting their first full-year increase in UK like-for-like sales in seven years is as much to do with a rise in UK inflation as it is Tesco’s restructuring plan," he said.
"The cooling of the UK supermarket price wars has enabled Tesco to increase their value sales, as well as volume sales, but this will likely be a result of inflation costs having been passed on to the consumer."
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