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Tesco 'disappointed' by its UK Christmas trading | |
(40 minutes later) | |
Tesco shares have dropped 10% after the retailer said it was "disappointed" by its seasonal trading in the UK. | |
Like-for-like sales, which exclude the effects of new store openings, fell 2.3%, excluding fuel and VAT. | Like-for-like sales, which exclude the effects of new store openings, fell 2.3%, excluding fuel and VAT. |
Tesco warned that it expected "minimal" profit growth for the current year as it increases investment, especially in the UK. | |
Total group sales for the seven weeks to 7 January rose 5.2% including petrol and 4.0% excluding petrol. | Total group sales for the seven weeks to 7 January rose 5.2% including petrol and 4.0% excluding petrol. |
The supermarket warned that its profits for the year would be "around the low end of the current consensus range". | The supermarket warned that its profits for the year would be "around the low end of the current consensus range". |
Tesco reported UK figures excluding VAT to strip out the effect of the increase in VAT at the start of 2011. When VAT was included, like-for-like sales fell 1.3%. | Tesco reported UK figures excluding VAT to strip out the effect of the increase in VAT at the start of 2011. When VAT was included, like-for-like sales fell 1.3%. |
In its statement, the supermarket chain also suggested that its spending on its promotion campaign - The Big Price Drop - had not been successful. | In its statement, the supermarket chain also suggested that its spending on its promotion campaign - The Big Price Drop - had not been successful. |
"In a highly promotional market, the volume response to our increased investment into lowering prices did not offset the deflation it has driven," it said. | "In a highly promotional market, the volume response to our increased investment into lowering prices did not offset the deflation it has driven," it said. |
Richard Hunter from Hargreaves Lansdown Stockbrokers said: "The lowering of prices did drive higher sales, but the pressure on margins rendered the promotion unsuccessful. | |
"Unfortunately the big price drop reported in this update will be remembered as more reflective of the shares than the campaign." | |
But Tesco reported online sales growth in the UK of 14%, across food and non-food. | But Tesco reported online sales growth in the UK of 14%, across food and non-food. |
Overseas growth | |
Tesco chief executive Philip Clarke said the international businesses had made good progress despite a challenging economic environment. | |
The retailer said it was pleased with the performance of its international businesses, although it was seeing "early signs of more cautious behaviour". | |
Group sales were boosted by 7% growth in Europe, 8.1% growth in Asia and 40.6% growth in the US. | |
Like-for-like sales in the US, where Tesco operates under the Fresh & Easy brand, grew 19.3%. | |
Despite the strong growth, Tesco announced earlier in the week that it was temporarily closing 12 Fresh & Easy stores in California, Arizona and Nevada because of weak local economies. | |
Tesco is the third of the big supermarkets to report its Christmas trading. Morrisons reported a 0.7% rise in like-for-like sales for the six weeks to 1 January, while Sainsbury's like-for-like sales grew 2.1% in the 14 weeks to 8 January. | |
"This was a deeply underwhelming performance by Tesco in its home market, and all the more grave, given the adverse weather conditions of December 2010," said John Ibbotson from the consultancy Retail Vision. | |
"Tesco's share of the market remains dominant, but is slipping. It has fallen from 30.5% a year ago to 30.1%." |