Tesco’s identical sales under pressure | RetailDetail

Tesco’s identical sales under pressure

Tesco’s identical sales under pressure

British retailer Tesco had to confirm the fear of analysts: the identical sales of the British chain have dropped by nearly one percent, mainly due to disappointing sales of non-food and convenience foods.

Horse meat scandal lowers sales

“We set out our approach and we have started the year on track, despite a continued difficult economic environment for consumers”, as CEO Philip Clarke commented about the quarterly figures, although even Clarke had to admit that the sales of non-food in the United Kingdom were a disappointment.

 

Another setback was the horse meat scandal, that also affected Tesco. Clarke talks about “…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.”

 

Total growth compensates identical losses

Tesco’sidentical growth on its British home market dropped by 0.9% (not including fuel sales) in the first quarter up to 25 May 2013. A year ago the market leader had a modest identical growth of 0.5% in the first quarter. Total sales not including fuel grew slightly by one percent.

 

The growth of online food, the increase in the number of ‘Click & Collect’ pick-up points to 169, improved customer service and the successful campaign on price comparison ‘Price Promise’, have stimulated sales according to Tesco. In that campaign Tesco compares prices at the register with those of competitors Sainsbury’s, Asda and Morrisons, after which customers get the price difference back. The campaign is contested however: rivals are complaining that private labels and fresh foods can not be compared objectively.

 

Switch in non-food

The growth of total sales can only just compensate the drop in identical sales: Tesco says it is strongly dependent in non-food on sales of consumer electronics, which suffered badly from the crisis in the first quarter.

 

Furthermore there is an effect of the switch from cheap household items to higher quality products that have higher margins: Tesco says this will cause a bigger growth. That will have to show in the numbers of the following quarters when the new range of high-quality household items will become available.

 

Internationally identical sales drop even more

Not only at home, but also internationally is the position of Tesco cause for worry, as identical sales abroad dropped even more, by 4.6 percent (not including fuel). Total foreign sales remained stable with a minimal growth of 0.1 percent. In Asia (-3.8%) and in Europe (-5.5%) the bad development of identical sales show that Tesco is still under pressure.

 

Tesco will take drastic measures on the market abroad, just as it did on its home market. After the announcement of the intended sale of all American activities some analysts have concluded that Tesco generates a lot of sales through hypermarkets – the format that seems the most vulnerable during the economic crisis and structural changes of demographic (aging of population) and technological (digitalisation) nature.

Questions or comments? Please feel free to contact the editors


Suitsupply suffers losses because of expansion

15/05/2018

Dutch Suitsupply has experienced a decent turnover growth last year, but its net result tumbled below zero because of its huge investments. Nevertheless, that is the only way forward according to its founder, whose focus is still fixed on the United States.

Starting this Friday, Belgium has its own national e-commerce event

15/05/2018

Move over, Black Friday! This week, Belgium launches its own national e-commerce event as Jack & Jones, Kiabi, La Redoute, Sarenza, Tape à l'Oeil and Veritas organise the first Belgian Friday.

H&M is turning to algorithms to boost sales again

14/05/2018

In an effort to reverse the decline in its worldwide sales, H&M is using technology that will help the world’s largest clothing brand stock its stores more efficiently, sell more effectively and adapt more quickly to current consumer trends.

Zalando's profit wiped away in first quarter

08/05/2018

German online retailer Zalando saw its first quarter profit completely wiped away: last year's 5.1 million euro net profit turned into a 15 million euro loss. Turnover grew 22 %, investments being the cause for both.

Strong online growth for Hugo Boss

03/05/2018

German fashion brand Hugo Boss managed growth in every region in the first quarter. Group turnover grew 5 % to 650 million euro, partially thanks to strong web shop sales.

France will impose recycling for unsold clothing in 2019

02/05/2018

The French government plans to impose a ban on the disposal or destruction of unsold clothing by fashion companies. The measure extends the rules already in place for food waste to the spillage of clothing.