Tesco sales slide at record speed as discounters pile on the pressure

 

Tesco has suffered its worst three months sale period in 20 years as customers abandoned the supermarket at record speed, according to new data.

Kantar Worldpanel said that the UK’s biggest supermarket lost around 1m, with its market share falling from 30.5 per cent to 29 per cent in the 12 weeks to May 25 compared with a year earlier – the fastest fall since records began in 1994.

It is still ahead of rivals Asda, which has 17.1 per cent, and Sainsbury’s with 16.5 per cent, but the 1.5 per cent fall at Tesco will add to fears that the supermarket is losing out to the discounters and its more traditional rivals.

Sales also dropped 3.1 per cent over the period – another record fall – with only struggling Morrisons performing worse. By comparison, discounter Aldi sales soared 35.9 per cent and upmarket Waitrose rose 6.1 per cent.

Yesterday’s results put extra pressure on chief executive Phil Clarke, who will today reveal the latest quarterly figures to the stock market, which are expected to be down by around 4 per cent.

He has attempted to pump new life into the brand by launching a £200m price cutting plan on may basic lines and attempted to improve the image of his stores.

However, both Asda and Morrisons have also introduced price cutting and most agree even with the discounts, the traditional supermarkets cannot compete with the prices at Aldi and Lidl.

Investors and analysts are also concerned by Tesco’s performance, suggesting the company must do more to adapt to the changing sector as its share price continues to trade at a 10 year low.

Bruno Monteyne, retail analyst at Bernstein Research and a former Tesco employee, explained that the supermarket had already raised prices before this latest round of discounting.

He said: “By raising prices faster than anybody else, we think Tesco has lost its differentiation, give a free ride to the targeted retailers at both ends of the spectrum (value and quality).

The ‘accelerated’ strategy is unconvincing; it is still trying to be everything to everybody and the only thing that has accelerated is market share losses.”

Edward Garner, director of Kantar Worldpanel, appeared to agree and pointed out Waitrose’s success despite its image for high end products.

He said: “At Waitrose, managing director Mark Price’s tactic of being “everything that the discounters aren’t” seems to have paid off for the retailer. By differentiating its offer, Waitrose has maintained its all-time record share of 5.1 per cent.”

The so-called price war between the Big Four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – is also starting to impact food inflation levels, according to Kantar.

It rose just 1.2 per cent, while the grocery market grew just 1.7 per cent – the lowest level for at least 11 years.

The Big Four all agree that the impact from discounters Aldi and Lidl has changed the face of the high street permanently but they are all attempting to find different ways to tackle deserting customers.

Asda appears to have tackled the problem fastest, as sales were up 2.4 per cent, following long term price cuts and a further £300m price drop announced last year, several months before similar actions by Tesco and Morrisons.

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