To read much of the analysis of this week’s news from the supermarket sector, you could be forgiven for thinking that Tesco is on the ropes. Tesco and J Sainsbury reported sales figures after a similar update from Wm Morrison about ten days earlier. Most of the attention was focused on the UK, and most of the brickbats were saved for Tesco, since its performance at home looks anaemic beside the other two.

This Tesco-is-struggling analysis is hogwash. It is nonsense because the UK’s largest supermarket is producing growth that — given its size, past successes and the pressures of the economic climate — is more than respectable: it is genuinely impressive. Like-for-like sales in the most recent three-month period, ignoring petrol (where rapid price fluctuations cloud the picture), rose 4.3 per cent. That figure may be less than Sainsbury’s, which told investors that its sales rose 7 per cent, and less than Morrison, which recorded 8.2 per cent across a similar period. But it is still good.

Since Tesco sells more stuff in the UK than Sainsbury and Morrison combined, it is only to be expected that the percentage increases will look more sedate. Yes, there is a risk that Tesco will find life at home more difficult because its key rivals are sharpening up their act after years in which they looked decidedly blunt. Yet in terms of actual new business generated, Tesco is still beating its rivals. Like a snowball that adds to its volume more quickly as it gets bigger, Tesco is rolling along very nicely.

Meanwhile, investors should also be impressed by the way that Tesco has developed itself. Although permission to build superstores has become much harder to secure, Tesco has opened in smaller formats. These stores dismay some independent shopkeepers, but they also serve to invigorate local community shopping centres and, for Tesco, are a sound innovation.

Tesco’s personal finance operation, coming on top of the way the company has moved into non-food items such as clothes and electricals, is also heartening.

And after all, 4 per cent of £40 billion (Tesco’s total UK sales) is more than 7 per cent of £20 billion (Sainsbury’s turnover in the past full financial year). Even if you chuck Morrison into the equation, Tesco has achieved more in absolute, pound-for-pound terms.

This is not to take anything away from either of Tesco’s rivals. In their ways, Sainsbury and Morrison are doing well and are attractive as investment propositions. It is simply to assert that comparison of like-for-like UK growth percentage figures tell only a part of the story.

Besides, Tesco’s performance outside the UK cannot and should not be ignored. Nearly a third of Tesco’s total sales come from overseas. If you add in the international component, and remember the growth rates that the company’s international operations are achieving, the picture changes. Where 4.3 per cent growth at home could be seen as respectably good, international growth of 20 per cent is impressive in absolute terms. Yes, Tesco is growing from a smaller base overseas, but the base is not that small. In fact, measured in terms of sales, Tesco’s still-young international operations are only a bit smaller than the total UK business of Sainsbury and somewhat larger than those of Morrison.

At the same time, both Morrison and Sainsbury are considered by some analysts to be more attractive because their UK operations are less mature and therefore have greater growth prospects. But on the international side Tesco has its own alluring immaturity.

There is, naturally enough, plenty of risk attached to Tesco’s overseas adventures. Currency shifts are an immediate headache: the 20 per cent growth record in the most recent period dilutes down to 11 per cent if the comparisons are made at constant exchange rates.

Tesco has spread its tentacles widely, and perhaps thinly, beyond our shores. Although it has one of the most respected boards in the FTSE 100 index, there must be concern that the management challenge will prove too much, or that an accident in one or other new venture will cause lasting damage. UK retailers, historically at least, have a poor record when it comes to international expansion. Tesco has its work cut out proving that it can reverse the trends of history.

There is a danger of drawing too much comfort from past performance. But as the chart shows, Tesco shares have done better than Morrison over the past ten years, and outperformed Sainsbury by a distance. Tesco’s record on dividend payments makes the total-return numbers even more impressive.

The yield on Tesco shares is a below-average 3.7 per cent and the price-to-earnings ratio is a little above those of its peers (inside and outside the retailing sector), which makes the stock look fully valued if not slightly expensive. But all the evidence points to the quality of Tesco — and quality comes at a price.

Resist, also, the temptation to think that the defensive qualities of Tesco shares, which came to the fore as the economy dived, are now less necessary. There is a place for Tesco shares near the heart of almost any equity portfolio. Buy.

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