British market leader Tesco disappoints once again with its first quarter numbers as the like-for-like turnover dropped 3.7 % in Britain, the third drop in a row.
Next quarters spell bad news as well
Kantar Worldpanel pointed out that the growth of the British grocery market is historically low, which obviously hits the market leader the hardest. Compared to last year, Tesco has lost 1.5 % of market share, dropping to 29 % according to Kantar. The company had already announced a 6 % yearly profit drop in April and Great Britain went down 3.6 %.
Tesco points out that the entire British grocery market is struggling and heralds itself as one of the front-runners in adapting to the changing market conditions. That is also why it has already warned of further bad news.
"Our accelerated plans are making a real difference 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."
Structurally lower prices
Tesco blames more than half of its performance on the decision to waiver random price promotions and to structurally invest in lower prices. "Since February, we have cut prices on the products that matter most, cut home delivery charges and made Grocery Click & Collect free."
The company believes this will increase customer fidelity and to further improve that, the CEO pointed out the company had launched its nationwide Clubcard Fuel Save program and will continue the store refresh program.
Store improvements impacted numbers
"We refreshed just over 100 stores in the quarter and will refresh over 200 more by the end of the first half. As we described in April, the disruption from our refresh program will continue to have an impact on our like-for-like sales performance."
Tesco believes this is a time for reform in a continuously changing market and the company must go through these changes. "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."
Clarke focuses on long-term goals
Despite Tesco's free fall, Clarke is focusing on the long-term goals, a courageous move for a CEO of a company on the stock exchange, which has had to blush each quarter because of weak numbers. He has to hope he is given enough time to get things right, despite the pressure to perform right now as well.
An analyst thinks investors "would need to ponder whether Tesco is a company showing glimpses of revival given its turnaround plan, or whether it is past its sell-by date."