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Tesco like-for-like sales down 3.7% in first quarter

Tesco has reported a 3.7% fall in UK like-for-like sales excluding petrol in its first quarter as the supermarket continues to come under pressure from discount rivals.

GENERAL MERCHANDISE

Tesco like-for-like sales down 3.7% in first quarter

In the three months to 24 May 2014 group like-for-like sales dropped by 3.2% excluding petrol while international sales declined by 2.2% on the same basis. Group sales edged down 0.9%.

Tesco chief executive Philip Clarke said: “As expected, the acceleration of our plans is impacting our near-term sales performance. The first quarter has also seen a continuation of the challenging consumer trends in the UK, reflecting still subdued levels of spending in addition to the more structural changes taking place across the retail industry. We are determined to lead in this period of change, building long-term customer loyalty and positioning the business to win in the multichannel era.”

The supermarket said the quarter had been one of significant improvement for customers as it looks to improve loyalty. This included four main waves of price cuts, enhanced rewards through the Clubcard Fuel Save scheme, lower delivery and service charges for grocery home shopping, and making grocery Click & Collect free.

Clarke continued: “Whilst these improvements will drive long-term loyalty, the associated reduction in the level of untargeted promotions and the deflationary impact from lower prices in the first quarter has affected our near-term sales performance.

“On price, the entire market has seen a step-down in growth since the end of last year largely driven by lower inflation, led by the actions we outlined in February. On promotions, we have chosen to reinvest for loyalty, helping customers manage their budgets on an ongoing basis rather than funding short-term, indiscriminate couponing. This step-down in couponing alone accounts for more than half of our underperformance relative to the grocery market compared to the final quarter of last year.”

Overall international sales increased by 0.5% at constant exchange rates, although a significant currency impact resulted in a sales decline of 8% at actual rates.

In Asia like-for-like sales dropped 3.2% compared to fall of 5.6% in the first quarter of the previous year. While like-for-likes edged down 1% in Europe, sales were positive in the Czech Republic, Hungary, Poland and Turkey but fell by 5.8% in Slovakia and 5.5% in the Republic of Ireland. Despite what it described as “intensely competitive” market in Ireland, Tesco said its performance in the country was starting to improve.

The supermarket refreshed over 100 stores in the period and plans to refresh a further 200 by the end of the first half. As a result the quarter saw double the number of weeks of refresh disruption compared to the same period last year. Tesco said it expects the ongoing disruption to continue to impact its like-for-like sales performance.

Looking ahead Clarke said: “We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers. We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole.”

*Tesco are one of the companies surveyed in brand-new consumer research from the Retail Bulletin. The white paper, entitled 'The Loyalty Balance Sheet' analyses how consumers rate retailers with regard to how they treat customers and how that impacts on profitability. The white paper will be unveiled at a special breakfast briefing on June 10th, prior to the Retail Bulletin's Customer Loyalty Conference, the same day. If you are a retailer and would like to attend the briefing, click here. You can also register for the conference itself here.

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