Britain’s biggest retailer Tesco has suffered its largest quarterly drop in sales for four decades, it says, hit by supermarket price wars and the rising popularity of German owned discounters.
Tesco, the world’s third biggest supermarket group, is facing fierce competition from Lidl and Aldi, as well as from traditional supermarket rivals comprising Walmart division Asda, Sainsbury’s, William Morrison and Waitrose.
British sales excluding petrol in stores open at least a year sank 3.7 per cent in the three months to May 24 from a year earlier, Tesco said.
That was the third successive quarterly drop and sent the company’s share price falling on the London stock market.
CEO Philip Clarke, who began working at Tesco as a shelf stacker 40 years ago, described the sales performance as the worst he had ever seen.
“There hasn’t been a quarter of like for like sales like this before that I can remember, but I’ve never seen a period of such intense transformation for the industry,” Clarke said.
Discount chains flourished in Britain during the recession, as consumers tightened their belts to save cash, and still remain popular despite the economy’s strong recovery this year.
Supermarket price wars in Britain have meanwhile pushed the annual inflation rate lower, weighing on the retail sector’s performance.
Clarke added that Tesco was “more competitive than we have been for many years” but warned that intensifying efforts on price cutting and store refurbishment would continue to weigh.
“As expected, the acceleration of our plans is impacting our near term sales performance,” he said in Wednesday’s earnings release.
“The first quarter has also seen a continuation of the challenging consumer trends in the UK, reflecting still subdued levels of spending in addition to the more structural changes taking place across the retail industry.”
He added that acceleration of the group’s own restructuring would impact its headline performance in coming quarters.
Clarke said the retail sector was suffering owing to years of falling wages among customers, once changes to inflation were taken into account.
He added that despite signs of economic optimism, “for the majority of customers it is not getting into their pockets”.
Industry data on Tuesday revealed that Tesco’s overall grocery market share in Britain had fallen sharply in recent months.
AFP
