Tesco growth slows in the first quarter

The supermarket giant has seen like-for-like sales in the UK drop by 1.5% as a result of 'challenging' market conditions.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

Despite liberally sprinkling the terms ‘robust, ‘steady, ‘solid’ and ‘in line with expectations’ throughout its trading statement, it’s clear that Tesco UK has hit something of a wall. The supermarket is spending a billion on revamping stores and hiring lots of new bright-eyed and bushy-tailed staff, but the return – thus far –has been lacklustre.

After issuing its first profit warning for 20 years, the supermarket giant has been desperately trying to boost revenues at its UK stores. But even with the effect of the Diamond Jubilee weekend – the Royalist orgy generated a massive £1bn in Tesco sales - the cash-strapped UK consumer is proving difficult to woo. That’s even with aggressive discounting and a coupon bonanza. And, with Kantar data showing a decline in market growth of 1.3%, from 3.7% in Q4 to 2.4% in Q1, every player in the UK grocery sector will be anxiously nibbling their cuticles.

Luckily for Tesco, its international business has fared rather better, and global sales are up 2.2%. Market share has increased in 11 of 12 foreign markets, and Asia is proving the jade jewel in Tesco’s crown, with sales growth of 9%. Even Europe is holding steady, despite the eurozone crisis, with like-for-like sales up 0.4%. Well, every little helps…

CEO Philip Clarke insists that group growth will remain steady, and he’s staking Tesco’s reputation on it too, leaving its profit target for the year unchanged despite the Q1 hiccup. Clarke better know what he’s doing, for his own sake - he's already had to pass up on his bonus - and Tesco's. The last thing the business needs is another profit warning.

However, if beer and snack sales from Euro 2012 don't prop up revenues in Q2, Clarke could always tap ex-Tesco boss Sir Terry Leahy for a few quid. MT hears sales of his new book Management in 10 words are going rather well...

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