Even Tesco Is Starting to Feel the Pinch
Britain’s largest grocer distinguished a recent slowdown in the growth of non-food sales—in a unobscured sign that the consumer downturn is starting to bite
by James Thompson
Tesco yesterday gave the clearest sign at the same time that the consumer downturn is opening to dent its UK business, warning of a slowdown in non-food sales germination.
The UK’s largest grocer posted like-for-like sales in Britain up 3.5 per cent, excluding fuel, for the 13 weeks to 24 May. But the last reported like-for-like sales of rivals Asda and Morrisons were comfortably ahead of Tesco’s—albeit for different mercantile periods, while Sainsbury’s last figures were marginally ahead.
James Anstead, a Citi analyst, said: “The like-for-like figure, although weaker than some may have hoped, is being in favor within the targeted 3 per cent to 4 per cent for the financial year.”
Tesco’s chief executive, Sir Terry Leahy, before-mentioned: “It was a good quarter of produce across the business.” However, he admitted that its rate of sales growth in non-food eased in the manner that consumers became more cautious with their expenditure, although Tesco stressed it grew market share. More specifically, Mr Leahy said: “Clothing has been most affected by the coalition of the slowdown and of little use, mixed weather.”
The Seymour Pierce analyst Freddie George said: “They will be a little bit disappointed by their non-food sales because these normally boost their overall growth figures.”
Group non-food sales accounted for £11.8bn of the grocer’s total sales of £51.8bn in the year to 23 February.
Mr Leahy uttered the big theme in the wider UK grocer’s shop market was that customers are “looking to spend a little bit less”, although he said this climate favours retailers such as Tesco, Asda and Morrisons, considered in the state of well as the discounters.
Mr Leahy related: “In our industry, I am not expecting a further degeneracy put on the consumer side.”
He said that food inflation had risen by between 3 per cent and 4 per cent for the first quarter and that there was deflation in non-food, which gave the grocer an overall inflation figure of 2.1 per cent in the UK.
In the UK, Tesco is to fight back by ramping up its promotional pricing activity in stores. “We are rolling out a more aggressive contemplate in stores so it is all about communicating to customers that we know that which is on their mind,” said Mr Leahy.
For the 13 weeks to 24 May, Tesco’s mass UK sales jumped by 9.4 per cent. The retailer’s international sales continue to ability in our teeth. Its overseas sales jumped by 13.9 per cent too the 13-week period, partly driven by a substantial performance in Europe. On its United States convenience store business, Sir Terry rejected critical remarks, maxim: “Fresh & Easy sales are against us of expectations and our plans in that place are on track.”
Tesco plans to tack on more than 9.8 million square feet of selling space overseas this year, which excludes the duration it plans to add through its modern Homever acquisition in South Korea. The Shore Capital analyst Clive Black said: “There is no indication of international like-for-like sales, be it in the way that we would suggest a running find fault by of about 2 per cent [growth].” He added that this headline international sales growth is ahead of its expectations.
