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Tesco reports new dip in sales
Tesco's recovery plans in the UK received a setback today as the supermarket chain reported a fresh dip in quarterly sales.
Chief executive Philip Clarke, who is overseeing a £1 billion plan to refresh the business, said the 1.5% decline on a like-for-like basis was in line with weaker growth across the whole market.
The group is also facing challenging conditions in its international markets, with underlying sales sharply lower in Thailand, South Korea and Ireland during the quarter to November 23.
The 1.5% decline in UK sales was in line with City forecasts and comes after a flat performance in the previous three months. When including changes in store space, the sales figure increased by 0.9%.
Mr Clarke said: "Continuing pressure on UK household finances have made the grocery market more challenging for everyone since the summer and our third quarter performance reflects this."
He said recent changes to the business, such as the relaunch of its Finest range and the refurbishment of more than 100 stores in the quarter, had been well-received by shoppers. Its online business has also recorded a record level of grocery orders.
Tesco's interim profits tumbled by almost a quarter in October to £1.39 billion after underlying sales declines in the UK and every one of its overseas markets.
As well as the squeeze on household spending power, Tesco has been impacted by the expansion of rivals in the discount sector. Last weekend, Lidl said its like-for-like sales were growing at 18% as it set out plans to more than double its 600-strong UK estate.
Today's figures show that underlying sales were 5.1% lower in Asia and 4% down in Europe, including a decline of 8.1% in Ireland.
Tesco shares were still more than 2% higher today after it said it remained on track to meet forecasts for the financial year.
Shore Capital retail analyst Clive Black believes Tesco is six to nine months behind the targets he set for the business in February.
However, he added: "We still support the strategy, encourage management to keep focused upon improving the performance of its existing store estate whilst constraining capital expenditure on new stores and building out its online and digital capability."