Tesco vows to act on UK sales slump

Supermarket Tesco admitted today that it must "do better" in the UK after missing growth targets and seeing sales fall on a year ago.





The retail giant promised new products and services after revealing a 0.7% drop in fourth-quarter UK like-for-like sales, excluding VAT and fuel.



Its fast-growing Asian business helped offset a tough domestic market, with Tesco reporting another year of record underlying profits - up 12.3% to £3.8 billion in the year to February 26.



But new boss Philip Clarke said the UK performance was not good enough as it failed to keep up with rivals in areas such as clothing and electricals.



"We didn't achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second half," the group said.



"We can do better and we are taking action in key areas - for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers."



Today's sales results mark a tough debut for the new chief executive, who took over from Sir Terry Leahy last month.



The fourth-quarter sales fall marks the first such dip into negative territory for nearly two years.



It last saw sales excluding VAT in the red during the second quarter of the 2009/2010 financial year, when the UK was in the middle of recession.



Mr Clarke vowed to up Tesco's game as part of a six-point plan for the year ahead.



He told the BBC Radio 4 Today programme the group would have to tap into a trend for far more cautious consumer spending.



He said: "Customers are looking for value, they're looking to adjust to higher levels of inflation, to higher levels of tax, to the fuel prices - so they're looking for value, eating out less, using cars a bit less, acclimatising to the economic situation.



"What we've got to make sure we do is set the business up to trade in those circumstances."



The group also hinted at new and improved food lines to improve UK trading and pointed to recent launches, such as its move into the second-hand car market through Tesco Cars, as an example of recent product innovation.



While Mr Clarke stopped short of waging a price war, experts warned the non-food drive could spell further hardship for high street retailers.



Matthew McEachran, at Singer Capital Markets, said: "With over £5 billion of sales and space potentially increasing by around 10% a year, intensification of their offer will result in more pressure for a number of general retailers including those already having to compete harder."









Tesco's UK general merchandise sales dropped 3.3% in the second half as it underperformed in clothing and electricals.



But the group is not the only major chain suffering as UK consumers tighten their belts.



Sainsbury's recently shocked the market with its fourth-quarter figures, which showed like-for-like growth of 1%, implying an underlying fall of up to 1% when VAT is stripped out.



Tesco gave little hope that retail conditions would improve this year.



It said trading would remain challenging, particularly on non-essential items.



Retail analysts were also alarmed by even greater losses in its fledgling US business, with the Fresh & Easy chain slumping into the red by £186 million.



But US sales growth of 9.4% over the year painted an improving picture and Tesco said it remained on track to break even within two years.



The group's strongest growth came from Asia, where trading profits rose 30% to £570 million, or 17.5% up on a constant currency basis.



Together with a robust European division, the two regions contributed nearly 70% of profits growth in the year.



Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "Tesco's international spread has again come to the rescue as its home market struggles to come to terms with the age of austerity."



Tesco's overall group profits rose 11.3% to £3.5 billion on a statutory basis, while revenues hit £68 billion.



The group said profits from services outside its traditional supermarket business continued to grow, to £583 million.



Tesco Bank saw annual profits rise 5.6% and the group confirmed aims to launch its first range of mortgages this year as it looks to compete against the major high street players.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect