Both Tesco and Sainsbury’s have announced results for the last six months, showing that once again Sainsbury’s has performed a lot better than the wavering British market leader, who is working long-term to reinvent itself.
Tesco: drop in non-food, marginal growth in food
Tesco’s UK turnover has increased 1.7 % over the first 26 weeks of 2013 (until 24 August). Like-for-like turnover however dropped 0.5 percent, which Tesco blamed on the caving non-food turnover. The chain stated it is working on a “transition to fast-growing categories with bigger margins”.
The British market leader has shown in its renewed Watford hypermarket that it is about focusing less on consumer electronics and more on clothing, decorative items for the house and kitchen and gift items. Non-food articles suffer less from online competition, according to Tesco.
The chain also points out that the like-for-like growth in food was positive, as turnover increased a meagre 1 percent. The market leader claims updating its home brand range has helped, with high-range Tesco Finest performing well.
Sainsbury's: convenience helps growth
Sainsbury’s comfortably outperformed Tesco in the second quarter and its half-year up until 28 September 2013: total turnover grew 4 % over six months and like-for-like it grew 1.4 %. That is a cut above Tesco’s, but still well off Waitrose’s like-for-like growth of 6.9 %.
Sainsbury’s points out that 0.3 % of its like-for-like sales growth comes from improving and rebuilding stores. The chain has rebuilt eight supermarkets and expanded two in the first semester. In addition, it closed two convenience stores, rebuilding another 22. Opening six new supermarkets and fifty new convenience stores has helped Sainsbury’s total sales growth.
Large turnover increase for Aldi
Retailers at the edges of the spectrum are doing great in Great Britain: not only is Waitrose, in the higher end of the market, performing great; Aldi is blowing everyone away. Aldi’s 2012 turnover rose 40.6 percent to 3.9 billion pounds (4.67 billion euro). Particularly meat, fruit and vegetables saw increased sales: meat sales grew 60 percent over the past three years.
Other figures grew significantly as well: Aldi managed to attract a million additional customers compared to last year and quite impressively, the chain saw its profit before taxes even increase 124 percent to 157.9 million pounds (190 million euro).
The company believes these numbers prove that their approach works in the United Kingdom. “We give customers exactly what they want, which is the best products at the best prices, every day of the year. We have a simple low pricing offer that customers really understand and we don’t try to confuse them with the likes of multi-buy promotions", says Matthew Barnes, Joint Group Managing Director.
This year, Aldi aims to open another fifty stores, with a 500th store opening in Bury St. Edmunds on 31 October. "We are continuing to open stores right across the country, attracting more people and a broader demographic to Aldi”, Barnes added.
Areas of growth: online and convenience stores
Alongside Sainsbury’s, Tesco has also been actively improving stores in the first six months. “So far over 30 % of our large stores have now received store-wide improvements to their look and feel, with average sales uplifts running at between 3% and 5%”, according to Tesco’s result statement. Just like in the superstores, Tesco is going for a “food first” approach in its Extra hypermarkets.
British retailers can gain more ground through online and through convenience stores, with Sainsbury’s stating that its second quarter online turnover has increased 15 %. Its convenience stores even grew 20 %, with the beautiful weather during the summer pushing sales.
Tesco building online supply chain
Tesco is writing off considerable sums in its real estate portfolio, limiting the number of new stores. 30 % of the stores it does open, are convenience stores. The first semester saw 54 new Tesco Express stores and 16 One Stop convenience stores from its subsidiary. This convenience retailer has not been integrated into Tesco and operates independently, after being bought in 2003.
Tesco’s online sales growth in foods grew some 13 %, with the chain offering customers the chance to pick up their online orders in 200 locations. Tesco’s online supply chain now consists of 5 distribution centres taking care of the online orders, with a sixth to be opened later this month to facilitate growth. This sixth centre has an increased level of automation (and therefore capacity).