Tesco's sales drop for fourth successive quarter

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The Independent Online

The finance director of Tesco has said there is a "real chance" of a further slide in consumer spending next year, as the grocery giant posted its fourth consecutive quarter of falling underlying UK sales. This was despite it launching a £500m aggressive price campaign in September.

Laurie McIlwee made his comments as the world's third-largest grocer, which operates in 14 countries, posted a 5.4 per cent rise in half-year sales, excluding petrol, boosted by new stores and strong performances in the US, Poland and Slovakia.

Asked about a further downturn in UK spending next year, he said: "There is a very real chance of that. They [consumers] have been cutting back all the way through this year. When your real wages are going backwards, your confidence is low and you are worried about your job... it is not a great environment for retailers," but he expects Tesco's UK performance to improve in 2012.

Tesco's UK like-for-like sales, excluding fuel and VAT, fell by 0.9 per cent over the 13 weeks to 26 November, the same as in its second quarter. But the grocer put a brave face on its UK division – which accounts for 72 per cent of its trading profit – by saying the Big Price Drop has helped increase food and grocery sales volumes by 1 per cent. But the deflationary impact of lower prices on around 3,000 items items more than offset the sales rise.

Mr McIlwee also hit back at the consultancy Retail Remedy – which dubbed its initiative the "Big Price Flop" – by saying: "It is not a promotion or a quick fix and its lasting impact should be judged over months not weeks."

Meanwhile, Tesco has prepared for the possible break-up of the eurozone; it is protecting itself against currency exposure by raising debt to pay off a £1.5bn eurobond due next year, and by signing shorter supplier contracts.