Even Tesco feels the squeeze

Another decent rise in UK sales for Tesco last quarter - but the retailer says times are getting tougher...

Last Updated: 06 Nov 2012

Tesco said this morning that like-for-like sales (not including petrol) were up 3.5% in the 13 weeks to 24 May. That was just about in line with the lower end of market expectations, but a noticeable drop from the ‘over 4 per cent’ growth recorded at its full-year results back in April. Apparently food sales have been holding up well, but non-food sales have been slowing as shoppers start to tighten their belts, postponing expensive purchases like TVs and homewear. Since these have been big profit drivers for Tesco in recent years, this is bad news for boss Sir Terry Leahy.

With John Lewis also reporting disappointing figures at the weekend – apparently sales have now fallen for the last four weeks in a row – it just goes to show that even the biggest beasts in the retail jungle are starting to feel the squeeze from the consumer spending slowdown. Since Tesco accounts for such a sizeable proportion of all the money spent on the high street these days, it was never going to escape the general ordure completely.

On the other hand, it’s all relative. Once you add in new UK retail space and petrol sales, Tesco still enjoyed a 9.4% boost in overall UK sales. And with so much of its business now coming from its overseas operations – which account for two-fifths of revenues – it’s not quite as exposed as some to the woes on the UK high street. International sales were up nearly 27% during the quarter, meaning that overall group sales rose almost 14%. Not exactly a crisis, then…

And there was more good news for the high street today, as the British Retail Consortium said like-for-like sales in May were nearly 2% up on last year. Meanwhile Alliance Boots appears to be thriving under private equity ownership. Executive chairman Stefano Pessina, who teamed up with buyout firm KKR for the controversial take-private deal last year, will have enjoyed cocking a snook at his critics today as he reported a 20% surge in group profits. As well as cost savings (including those from the merger of Boots and Alliance Unichem the previous year), it also saw a 20% rise in the sale of health and beauty products, like its famous No7 make-up range.

Just goes to show: the prospects for our economy might not look terribly good, but that’s no reason why anyone should say the same about us...

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