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Tesco sales fall across all major markets Tesco sales fall across all major markets
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Tesco has been hit by falling sales across all its major markets, including the UK, underlining the scale of the task facing chief executive Philip Clarke as he struggles to restore growth at Britain's biggest retailer. The scale of the task facing Tesco chief executive Philip Clarke was underlined on Wednesday as the UK's biggest grocer revealed fresh declines in every country where it operates.
Sales in the UK fell by 1.5% in the third quarter, excluding new stores and petrol, with Tesco blaming "an unprecedented period of declining incomes" and a "challenging grocery market". Like-for-like sales in the UK – which exclude gains from new shopfloor space – fell by 1.5% in the third quarter, excluding new stores and petrol, with Tesco blaming "an unprecedented period of declining incomes" and a "challenging grocery market".
The dip in sales represents a deepening of Tesco's woes, following a period of stagnant UK growth earlier this year. John Ibbotson of Retail Vision said Clarke's job was now under threat, arguing that Tesco was not changing fast enough to respond to the shakeup in the grocery market. The dip in sales represents a deepening of Tesco's woes, following a period of stagnant UK growth. They are a further decline on the 0.7% fall recorded over the same period last year.
Tesco fared even worse in its major foreign markets: sales in continental Europe were down 4%, with the steepest fall in Ireland, where sales plummeted by 8.1%. The fall in Slovakia was 5.7% and 4.9% in the Czech Republic, but the pace of decline slackened in Poland with a 0.7% fall, and Turkey, down 3.5%. Retail analyst Dave McCarthy at HSBC said: "There was no good news in the statement, only confirmation that things are as bad as expected and worse in some instances."
John Ibbotson of consultants Retail Vision said Clarke's job was now under threat, arguing that Tesco was not changing fast enough to respond to the shakeup in the grocery market. In the UK, which generates 70% of Tesco profits, the grocer is losing market share at the premium and discount ends of the market, to rivals like Aldi and Waitrose. Shoppers are also making more non-food purchases on the internet and replacing the big weekly shop with online delivery and convenience store shopping – leaving Tesco with too many big stores.
Tesco fared even worse in its major foreign markets: sales in continental Europe were down 4%, with the steepest fall in Ireland, where sales plummeted by 8.1%. The fall in Slovakia was 5.7% and 4.9% in the Czech Republic, but the pace of decline slackened in Poland with a 0.7% fall, and Turkey was down 3.5%.
In Asia like-for-like sales were down 5.1%, with Thailand the worst performer, down 6.9%, followed by South Korea, down 4.8%.In Asia like-for-like sales were down 5.1%, with Thailand the worst performer, down 6.9%, followed by South Korea, down 4.8%.
Clarke, who has embarked on a £1bn turnaround plan since taking the top job in 2011, said customers were already seeing improvements that would pay off for the company in the long run. Clarke, who has embarked on a £1bn turnaround plan since taking the top job in 2011, said customers were already seeing improvements that would pay off for the company in the long run: "We are in the middle of that business transformation plan, we are in the middle of a retail revolution and we are in the middle of the toughest retail market in a generation. It makes for some difficult quarterly reporting but we are already getting better for customers every day."
"We are in the middle of that business transformation plan, we are in the middle of a retail revolution and we are in the middle of the toughest retail market in a generation. It makes for some difficult quarterly reporting but we are already getting better for customers every day," he told journalists.
Facing calls to copy the discounters by slashing prices, Clarke said he would not "trade long-term health for short-term help", adding that price was only one factor. "We are absolutely determined to make sure that price, quality, range and service improve for customers everywhere."Facing calls to copy the discounters by slashing prices, Clarke said he would not "trade long-term health for short-term help", adding that price was only one factor. "We are absolutely determined to make sure that price, quality, range and service improve for customers everywhere."
With the poor UK performance widely expected in the City, Tesco shares rose in early trading, but slipped 0.2% later to 340 pence. Investors were relieved there was no alarm bell on profits – Tesco noted it was "performing in line with market expectations for the full year" – but its 5.2% profit margin has been described by HSBC as unsustainable. Clark denied that Tesco was squeezing suppliers to hold up its profits.With the poor UK performance widely expected in the City, Tesco shares rose in early trading, but slipped 0.2% later to 340 pence. Investors were relieved there was no alarm bell on profits – Tesco noted it was "performing in line with market expectations for the full year" – but its 5.2% profit margin has been described by HSBC as unsustainable. Clark denied that Tesco was squeezing suppliers to hold up its profits.
Other City analysts called on investors to have patience with the supermarket giant, which is attempting to win back customers by giving stores broader appeal, with the introduction of Harris & Hoole coffee shops and family-friendly Giraffe restaurants. Tesco said it had "refreshed" more than 100 stores during its third quarter and claimed it had tailored 1,600 Express stores to local needs. But with more than 3,000 shops across its estate – including 1,000 superstores – Clarke said the overhaul would take time: "We do plan to go quicker but you can only go as quick as you can go." As the bricks-and mortar revamp takes shape, Clarke is trying to sharpen up Tesco's internet presence by expanding click-and-collect services. The grocer also revealed that it has sold 300,000 of its Hudl tablet computers and expects to double that over Christmas. Other City analysts called on investors to have patience with the supermarket giant, which is attempting to win back customers by giving stores broader appeal, with the introduction of Harris & Hoole coffee shops and family-friendly Giraffe restaurants. Tesco said it had "refreshed" more than 100 stores during its third quarter and claimed it had tailored 1,600 Express stores to local needs. But with more than 3,000 shops across its estate – including 1,000 superstores – Clarke said the overhaul would take time: "We do plan to go quicker but you can only go as quick as you can go."
As the bricks-and mortar revamp takes shape, Clarke is trying to sharpen up Tesco's internet presence by expanding click-and-collect services. The grocer also revealed that it has sold 300,000 of its Hudl tablet computers and expects to double that over Christmas.
But Ibbotson said the decline in sales called Clarke's turnaround plan into question. "Another very poor set of results from the UK's largest grocer … This, together with declining sales in key overseas markets, will put Clarke and his senior management team under threat. Everything now depends on the critical Christmas period, but schmaltzy advertising, sponsorship of Downton Abbey and promising jam tomorrow are no guarantees that things will turn around."But Ibbotson said the decline in sales called Clarke's turnaround plan into question. "Another very poor set of results from the UK's largest grocer … This, together with declining sales in key overseas markets, will put Clarke and his senior management team under threat. Everything now depends on the critical Christmas period, but schmaltzy advertising, sponsorship of Downton Abbey and promising jam tomorrow are no guarantees that things will turn around."
Tesco, along with Asda, Sainsbury's and Morrisons, is being squeezed from both sides by upmarket grocer Waitrose and discounters Aldi and Lidl. The rise of the discounters meant that Tesco's attempt to blame its weaker grocery performance on "the effects of an unprecedented period of declining real incomes" and the "higher cost of living" was met with scepticism. Aldi and Lidl continue to increase their market share, according to the latest data from Kantar, by broadening their range into discounted luxuries such as fine wine and partridge. Aldi recently outlined plans to double its store numbers.
The rise of the discounters meant that Tesco's attempt to blame its weaker grocery performance on "the effects of an unprecedented period of declining real incomes" and the "higher cost of living" was met with scepticism. Aldi and Lidl continue to increase their market share, according to the latest data from Kantar, by broadening their range into discounted luxuries such as fine wine and partridge.
But Bryan Roberts, Kantar Retail's director of retail insights, warned against the "nuclear" option of slashing prices. "The recent past shows us that value is so much more than price," he said, advising Tesco to concentrate on improving its stores and customer service.But Bryan Roberts, Kantar Retail's director of retail insights, warned against the "nuclear" option of slashing prices. "The recent past shows us that value is so much more than price," he said, advising Tesco to concentrate on improving its stores and customer service.
Phil Dorrell at Retail Remedy described the results as "a like-for-like whitewash", but said Tesco could still turn things around. "The re-emergence of Tesco won't happen overnight and some shareholders will lose patience with what is likely to be another year of mediocre results. Shareholders with a sense of perspective, though, will cut Tesco some slack. The long-term value and returns Philip Clarke talks about will come but it will take time."Phil Dorrell at Retail Remedy described the results as "a like-for-like whitewash", but said Tesco could still turn things around. "The re-emergence of Tesco won't happen overnight and some shareholders will lose patience with what is likely to be another year of mediocre results. Shareholders with a sense of perspective, though, will cut Tesco some slack. The long-term value and returns Philip Clarke talks about will come but it will take time."
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