Tesco suffers worst sales for decades

Tesco has suffered its worst sales performance in decades, piling the pressure on its chief executive, Philip Clarke, who is struggling to revive Britain's biggest retailer as it grapples with extra competition from discounters such as Aldi and Lidl.

Sales in the core UK business fell by 3.8% in the three months to 24 May on a like-for-like basis, an acceleration of the 3% slide in the previous quarter.

Clarke admitted the sales decline was the worst he could remember in more than 30 years at the supermarket group: "I haven't seen a quarter of like-for-like sales like this before that I can remember but I haven't seen a period of transformation like this for the industry."

Clarke is trying to revive sales at Tesco's core UK arm by revamping stores and cutting prices on staples such as bacon, eggs and bread. He said that the turnaround plan would continue to affect performance this year as price cuts took time to lure customers back.

"I see every day the improvements in the business but I'm not making any promises about sales improvements in the next few quarters."

Clarke said shoppers' spending power had been squeezed since 2008 and that they were still not feeling the benefits of lower inflation and the economy's recovery. As well as competition from Aldi and Lidl, the supermarket sector is also undergoing upheaval from the rise of internet shopping, he said.

Some big investors are losing patience with Clarke, 18 months into his plan to revive Tesco after UK profit fell for the first time in 20 years.

Clarke said: "You're right, it is 18 months and they are the worst numbers but we accelerated our plans in February because we could see how the plan will work and the pace of change is huge. It has some headwinds and some consequences."

He declined to comment on discussions with Tesco's big shareholders, saying they were "confidential to us".

Recent industry data shows that Tesco appears to have lost more than 1m customer visits per week, worth £25m in sales, with its market share showing the biggest fall for at least 20 years. A survey published on Tuesday by Kantar Worldwide showed that in the 12 weeks to 25 May, Tesco's market share dropped to 29% from 30.5%.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "Investors need to ponder whether Tesco is a company showing glimpses of revival given its turnaround plan, or whether it is past its sell by date. The wider ferocity of competition is making the implementation of the plan more difficult to achieve, although the company is trying to position itself within the three largest requirements of the supermarket sector at present, in the form of price, online and convenience stores."

Kantar said the grocery market was at its weakest for at least 11 years and that excluding inflation and population growth the market was stagnant.

Powered by Guardian.co.ukThis article was written by Sean Farrell, for theguardian.com on Wednesday 4th June 2014 09.06 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010


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