Tesco reports fall in UK sales
Supermarket giant Tesco said its UK like-for-like sales, excluding petrol, fell by 1% in the last three months as performance was held back by work to refocus its general merchandise offer.
In the 13 weeks to 25 May 2013, total UK sales increased by 1%, excluding petrol, at constant exchange rates in what the retailer described as a "subdued market". Group sales rose by 0.7%.
The supermarket’s UK performance was stronger in every food category during the quarter than in the last two months of the prior year, with the exception of frozen foods and chilled convenience meals.
The drag on like-for-like sales growth from non-food was more significant than in the fourth quarter of last year which Tesco said was due its disproportionate exposure to consumer electronics and the acceleration of its general merchandise strategy as it shifts from low-margin, low-growth categories to higher-margin, higher-growth categories.
Tesco’s clothing offer delivered a "strong performance" in the quarter as the F&F brand was boosted by the industry launch of its Autumn/Winter 2013 collection and the announcement of plans to extend the franchising of F&F to more markets in central Asia and the Middle East.
The supermarket said its online grocery operation in the UK was continuing to outperform the market.
Net new space contributed 1.9% to UK sales growth in the first quarter, with new store openings focused on convenience. Tesco said its new store opening programme was on trackand that around 1.1 million square feet would be opened across its four Tesco formats of Extra, Superstore, Metro and Express in the full year.
Looking across its international markets, Tesco said its customers "continued to face challenging conditions". Like-for like sales in Europe fell by 5.5%, although the group’s business in Hungary returned to positive like-for-like growth with improved levels of customer spend and a better performance in general merchandise and clothing.
In Asia, like-for-like sales fell by 3.8% as sales were impacted by regulatory restrictions on opening hours in Korea.
Tesco said its process to exit the United States was on track.
Commenting on the results, chief executive Philip Clarke, said: "In April, we set out our approach for growth and returns for the Group, including a number of appropriate and realistic objectives for the years ahead and we have started the year on track, despite a continued difficult economic environment for consumers. This is notwithstanding our planned work on general merchandise, which has held back sales in the UK, and a small but discernible impact on frozen and chilled convenience food sales due to the customer response to equine DNA being detected in four products.
"Importantly to the objectives we have set out for sustainable and disciplined growth, customer perceptions are improving across all aspects of the shopping trip in the UK, driven by continued progress on our plans to 'Build a Better Tesco' and our market-leading multichannel offer.
"We have set out our plans to put customers back at the heart of the way we do business, and this is particularly evident in our recent initiatives on price and on food trust. Customers across the UK are embracing Price Promise and we are encouraged by performance in our core fresh food categories and uplifts from refreshed stores.
"Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year. Whilst we are not expecting economic conditions to improve in the near term, we have a customer-focused plan for the year in each of our markets which takes this into account, and we will maintain a disciplined approach to investment and cash flow as outlined in April."
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