Tesco's sales fall in Christmas periodThursday 09 January 2014 18.59
Tesco, the world's third biggest retailer, posted another heavy drop in underlying sales in its main UK market in the Christmas trading period, adding pressure on management to end a run of poor results.
The firm is 21 months into a turnaround plan for its main UK business that has seen over £1 billion sterling invested in store revamps, more staff and pricing initiatives.
Despite the changes the firm said today that sales at UK stores open over a year, excluding fuel and VAT sales tax, had fallen 2.4% in the six weeks to January 4, towards the lower end of expectations.
Analysts had forecast a range of down 0.5-2.5% and a third quarter decline of 1.5%.
Tesco said it expected to report a full year group trading profit within the range of current market expectations, which it said ranged between £3.16 billion and 3.41 billion.
Trading improved in Europe but remained difficult in Asia. The company did not give a breakdown of its performance within its various European markets.
"We continued to invest in the most compelling offer for the tens of millions of customers who chose to shop with us this Christmas, but further weakness in the grocery market as a whole continued to impact our performance in the UK," chief executive Philip Clarke said.
Though Britain's economy is improving, major grocers are finding the going tough despite their focus on essential goods, as consumers' disposable incomes remain under pressure by wage rises not keeping up with inflation.
Morrisons also posted a big drop today with like-for-like sales excluding fuel down 5.6% in the six weeks to January 5 and the firm now expecting full-year underlying profit towards the bottom of market expectations.
Sainsbury's eked out a 0.2% rise in third quarter like-for-like sales on Wednesday.
The big four supermarket groups in the UK are also being squeezed by hard discounters Aldi and Lidl, who both enjoyed record trading at Christmas, and upmarket grocers Waitrose and Marks & Spencer, which today posted like-for-like food sales up 1.6% in its third quarter.
Tesco has suffered more than many rivals because it has traditionally sold a higher proportion of large ticket non-food items, such as widescreen TVs, where shoppers cut back the most in the downturn.
Chief executive Clarke is now re-focusing the firm's non-food offer on higher margin categories like clothing and homewares but the process has been slow. He is also investing heavily in digital services, local convenience stores and click-and-collect points.