Tesco continues online growth

Internet sales and financial services hoped to boost retailer's performance

Tesco now has more than a million online grocery customers

Tesco is looking to a new online clothing range and building technology to support its new financial services offerings to help bounce back from the recession.

Sales at the firm’s internet businesses – including web-based grocery and Tesco Direct – grew by 11 per cent to £1bn, with profit rising 21 per cent to £58m, during the 26 weeks to 29 August.

To strengthen its web portfolio, Tesco launched an online clothing store offering a range of about 3,500 product lines from 20 brands and now hopes to achieve 10 per cent of its total clothing sales online.

According to Tesco, the online range will offer customers a wider choice overall and make clothing items more accessible to shoppers who do not live near to one of its larger stores.

The number of active grocery customers at Tesco.com has grown to exceed one million and the firm claims service levels have been improved, resulting in fewer abandonments and reduced call volumes to the service centre.

The company is also bullish about developments around Tesco Bank – the new name for Tesco Personal Finance, the joint venture originally conceived with Royal Bank of Scotland and now wholly owned by the retailer – and IT work for the division is in progress.

Tesco signed an agreement with financial services giant Fortis for the development of banking and insurance platforms last month and core technology platforms for the banking products have also been chosen.

Over the past 12 months, the total number of customer accounts at Tesco Bank grew by 300,000 to more than six million across all product lines, making a £115m profit on a £420m turnover. Tesco is now the seventh largest credit card issuer in the UK.

According to Tesco chief executive Terry Leahy, the performance at the financial arm was positive in a challenging retail banking environment, but the group is now building the team in preparation for a faster rate of growth.

"The progress across the group, combined with our strong financial position funding continued investment in new space and new businesses, means we’re well-placed for the global recovery,” said Leahy.

Tesco posted UK sales growth over the first half of 2009 of 2.7 per cent to £20.6bn, while profit before tax grew 1.5 per cent to £1.42bn.