Tesco sales dip for fourth quarter

Tesco ‘s UK and Ireland sales jumped 8 per cent in the first half of its financial year (Reuters)

The UK's biggest supermarket Tesco reported falling sales for the fourth quarter in a row today despite its £500 million price-cutting campaign.

In the UK, where it has 2,700 stores, Tesco recorded a 0.9% decline in like-for-like sales excluding VAT and petrol in the 13 weeks to November 26, equal to the drop seen in the previous quarter.

Despite the decline, the grocer insisted the results of its Big Price Drop, which saw the cost of 3,000 everyday products slashed, were "promising" as food volumes rose by a whole percentage point, offsetting the deflationary impact of its price cuts.

Elsewhere, Tesco saw a significant slowdown in Asia, which has driven the overall group performance in previous months, where like-for-like sales grew 0.8%, compared with 3.9% in the second quarter, as the impact of flooding in Thailand and warm autumn temperatures in South Korea and China took their toll.

Shares were down 1% after the trading update, which Kate Calvert, retail research analyst at Seymour Pierce stockbrokers, called "uninspiring".

She said Tesco's use of the word promising to describe the early results of its Price Drop strategy was not "particularly encouraging language".

Tesco covered its price cuts by slashing the number of multi-buy promotions and scrapping its double Clubcard points reward offer.

The offensive triggered an aggressive response as competitors responded with their own schemes, such as Sainsbury's Brand Match campaign and Asda's move to bring petrol prices down.

Tesco's market share slipped to 30.5% in the 12 weeks to November 27, from 30.7% a year ago, researchers Kantar Worldpanel said this week, but customer numbers were still up.

Chief executive Philip Clarke said: "Times are tough for a number of our customers at home and in a number of our international markets."

The grocer said it had seen an improvement in the decline in its like-for-like sales of non-food items, with strong performances in the home and electricals sectors offsetting a weaker show from CDs and home entertainment categories.

Tesco said it had seen strong performances in new stores, as total sales including VAT and petrol grew by 6.7% in the period, while online sales increased by 10%.

The group's Asian powerhouse market faltered in the quarter due to a number of temporary factors hitting sales.

In Thailand, like-for-like sales slowed from 7.5% to 1.4% as devastating floods forced the closure of 165 stores across the country.

Meanwhile, the warmest autumn in northern Asia for 75 years affected seasonal merchandise sales, particularly in South Korea, where same-store sales slowed from 0.9% growth to 0.3% and in China where like-for-like sales grew 3.4%, compared with 6.1%.

Its Europe division strengthened, with like-for-like sales up 0.9%, compared with 0.1% in the previous quarter, driven by Poland and Slovakia.

The loss-making US business, Fresh & Easy, which aims to break even by the end of the 2012/13 financial year saw like-for-like sales growth of 11.9% as customer numbers increased and average spend was higher.

PA