Tesco battered as market share hits seven-year low

Rivals Sainsbury's and Asda the big winners from supermarket giant's latest woes

Tesco's share of the UK grocery market has fallen to its lowest level in nearly seven years, landing another blow on its chief executive, Philip Clarke, during his first year at the helm.

The retail giant issued its first profit warning in 20 years last month, and saw its market share fall by 0.6 per cent to 29.9 per cent over the 12 weeks to 22 January, according to the closely watched Kantar Worldpanel data.

This was the first time since May 2005 that Tesco's market share had fallen below 30 per cent, when it was at 29.7 per cent.

Asda and Sainsbury's appear to have gained most from Tesco's UK woes. Marks & Spencer, Waitrose, Aldi and Lidl have also powered ahead, as spending has become polarised between discounters and the more premium grocers.

Clive Black, the analyst at Shore Capital, said: "When you are the size of Tesco and you have a bump, then everyone is going to feed off that."

Mr Clarke, a Tesco lifer who became chief executive in March 2011, admitted the chain had made a series of errors, such as not issuing enough coupons, before Christmas. This contributed to a 2.3 per cent fall in its UK like-for-like sales over the six weeks to 7 January.

But it was Tesco's decision to invest £400m in 2012-13 improving its UK stores that led to its first profit warning since the early 1990s.

Ed Garner, a director at Kantar Worldpanel, said there is "considerable pressure on Tesco", adding that its growth of 2.1 per cent over the 12 weeks was only half the market average of4.2 per cent.

Asda grew its sales by 8.2 per cent over the 12 weeks to give it a market share of 17.5 per cent.

Sainsbury's has also gained ground on Tesco – which overtook it in 1995 to become the UK's biggest supermarket – and posted sales growth of 5 per cent. This helped Sainsbury's to grow its market share by 0.1 per cent to 16.7 per cent, maintaining its highest figure since March 2003.

But Morrisons has been less bouncy recently, with its sales growing below the market at 3.7 per cent over the 12 weeks. Its market share slipped by 0.1 per cent to 12.3 per cent.

Iceland Foods, the up-for-sale frozen food retailer, continued its strong recent performance, growing sales by 11.3 per cent. The private equity firms BC Partners and Bain Capital are thought to have submitted final-round bids of up to £1.5bn yesterday.

The Kantar data is the latest headache for Mr Clarke. In addition to a string of departures among his top team, Bob Robbins, Tesco's UK chief operating officer, sold more than £200,000 of shares in the supermarket a week before its first profit warning, although Tesco said he did nothing wrong.

The group, which has operations in 14 countries including China and the US, is still expected to grow profits to £3.6bn for the year ending in February.

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