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Business News

Tesco sales fall again amid alert on its £1bn push


Tesco has posted its fourth consecutive quarter of falling UK underlying sales, prompting analysts to warn its £1bn investment plan to turn around its domestic trading could be a "marathon".

However, the UK's biggest grocer said its first-quarter performance would have been "substantially better" had it included the build-up to the Diamond Jubilee, which was its "biggest ever week" outside Christmas.

Tesco, the world's third-biggest retailer, posted a 1.5 per cent fall in UK sales, excluding fuel and VAT, for the 13 weeks to 26 May.

This was in line with City expectations and represents a slight improvement on the 1.6 per cent drop in its fourth quarter. City analysts were also relieved there was no change to full-year guidance, following its first profit warning in 20 years in January.

Nevertheless, the weak performance from Tesco will ratchet up the pressure on Philip Clarke, who took the helm in March 2011, and its latest trading will contrast unfavourably to Sainsbury's results tomorrow. The UK's third-biggest supermarket is expected to deliver a 1.6 per cent rise in like-for-like sales, although its trading period covering the Jubilee bank holiday.

Mr Clarke put a brave face on Tesco's UK results by stressing it had so far spent "very little" of its £1bn investment plan that covers hiring 8,000 extra store staff this year, increased training and sprucing up its stores. He said: "I can see momentum gathering."

Richard Hunter, the head of equities at Lansdown Stockbrokers, said: "Realistically, this is a marathon and not a sprint for Tesco. The amendment to its business model will take time to implement and wash through."

Mr Clarke cited a "great response" to the launch of its Everyday Value range, which replaced its existing Value range, in the spring and said it had trained and put 4,300 additional staff into 700 of its Extra hypermarkets and Superstores.

Tesco delivered more than £1bn of sales in the run-up to the Jubilee. Group sales at Tesco, which has operations in 14 countries, rose by 2.2 per cent. The Fresh & Easy operation in the US disappointed with sales up by just 3.6 per cent.