Shaken & Stirred - Influential Brand Profiling and Positioning

Tesco sales down as recovery gets off to slow start

Tesco, the world’s third-biggest retailer, has seen a drop in quarterly underlying sales in its main British market, it reported on Monday, showing its recovery plan following a shock profit warning in January is taking time to gain traction.

The supermarket group, with over 6,000 stores in 14 countries, said consumer confidence was subdued across all of its markets, with total sales up 2.2 percent including petrol in the 13 weeks to May 26, its fiscal first quarter.

Once one of the most consistent British companies in terms of earnings growth, Tesco stunned investors in January with its first profit warning in over 20 years, saying it needed to invest heavily to stem a steady decline in UK market share. Many European retailers have been struggling as shoppers’ disposable incomes are squeezed by higher prices, muted wages growth and government austerity measures.

Tesco, which accounts for about one in every 10 pounds spent in British shops and makes over 70 percent of its trading profit there, has suffered more than rivals like Sainsbury and Asda in part because it sells more discretionary goods like homewares, where shoppers have been cutting back most on spending.

British stores

The group said first-quarter sales at British stores open over a year, excluding fuel and VAT sales tax, fell 1.5 percent, in line with analysts’ expectations.

That was marginally better than a 1.6 percent decline in the fourth quarter of its previous financial year, despite a tough comparative period when sales were boosted by a royal wedding.

“Our performance in the UK has been steady during a challenging quarter for the industry as a whole,” said the firm. “The industry remained very competitive through the quarter, with a significant amount of couponing activity.”

Tesco added that it saw its biggest ever week outside of a Christmas period in the run-up to the four-day Queen’s Diamond Jubilee holiday weekend, with over 1 billion pounds in sales.

Leave a Comment