Tesco sees UK sales drop in third quarter

For fresh fruit and vegetable marketing and distribution in Asia
Steven Maxwell

BY STEVEN MAXWELL

Tesco sees UK sales drop in third quarter

Despite launch of Big Price Drop, Tesco's UK sales continued to fall, but US and Asian businesses performed strongly

Tesco sees UK sales drop in third quarter

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Tesco has reported a 0.9 per cent drop in like-for-like sales excluding petrol at its core UK business in its third quarter trading statement for the 13 weeks to 26 November, marking the fourth consecutive quarter of falling sales for the retailer.

The sales drop follows a similar decrease in the previous quarter of 0.9 per cent and a lesser fall of 0.1 per cent in the first quarter of 2011.

More significantly, the results follow the launch of Tesco UK’s Big Price Drop promotion in September, which had been designed to revitalise flagging sales, prompting a price war with rivals.

"We have made good progress in our third quarter against the background of challenging conditions for consumers in many of our markets," said Tesco CEO Philip Clarke.

"In the UK, our increased investment in the shopping trip for customers is starting to deliver. The Big Price Drop campaign, now in its second phase, has lowered prices significantly for hard-pressed families and we are now being rewarded with stronger food volume growth. We are also seeing positive customer reaction to the improvements in our general merchandise ranges. Whilst I am pleased with these early signs of stronger performance, a great deal more remains to be done and we are confident of delivering further improvements as we implement our plans."

There was better news for the retailer in its international business. Increased customer numbers and a higher average spend helped boost like-for-like growth in Tesco’s US Fresh & Easy business by 11.9 per cent.

Like-for-like growth in Asia slowed to 0.8 per cent during the third quarter from 3.9 per cent in the previous quarter; a performance Tesco blamed on November’s flooding in Thailand and the warmest Autumn temperatures in 75 years hitting seasonal merchandise sales in Korea and China.

However, the results of the global business contributed greatly to a 5.4 per cent rise in total group sales for the third quarter excluding petrol.

"Overall, we saw good growth internationally despite some of our markets in Asia being affected by difficult trading conditions," Clarke added. "In particular, the disruption in Thailand caused by the flooding interrupted an otherwise strong sales trend and the response of our team there to the crisis has been outstanding – both for customers and for our staff. Elsewhere, both Central Europe and Fresh & Easy delivered further pleasing performances."

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