Tesco sales flatten out as retailers brace for a tougher Christmas

Looks like Tesco might be losing its Midas touch in the UK. The retailer has reported a pedestrian UK sales growth of just 1.5% in the three months to the end of November. The company is pointing the finger squarely at ‘uncertainty’ over the impact of the Government’s spending cuts, which are causing people to scrimp and save in the run-up to Christmas. It’s not just Tesco, though – new figures from the British Retail Consortium show that the sector as a whole is facing a tough Christmas. Ah, well. Who needs expensive gifts, anyway?

It’s not great news for the company that has slipped this year from second to eighth place in MT’s Britain’s Most Admired Companies list (even if CEO Sir Terry Leahy won the Most Admired Leader category yet again). That said, things looked rather rosier abroad – or in the US, at least, where like-for-like revenue was up nearly 10% after what it described as a ‘strong’ Thanksgiving, which helped to push sales for the whole group up by 8.8%. It was a different story in China, though, where a spokesperson admitted sales had been disappointing after a spate of ‘unusually warm’ weather (we could do with a bit of that here). Although the £4bn it’s planning to invest in the region over the next four years should do something to combat that in the long-term…

The good news is that the retailer says sales have ‘generally held up well’ under pressure from the snow. That’s partly because it has sent out its delivery lorries three hours earlier than usual every day to give them more time to traverse the UK’s icy roads, and partly because it has employed a crack team of 150 quad bikes adorned with ploughs to clear snow from car parks. Every little helps, we suppose. But finance director Laurie McIlwee said Tesco’s management is staying cautious. ‘It’s hard to call what the fourth quarter will be like,’ she said.  

Tesco isn’t the only retailer bracing itself for a tough Christmas, though. The BRC said UK retail sales are up by just 0.7% on last November – the eighth month in a row sales growth has been weak. That said, internet sales have bucked the trend, with sales jumping by 17.6% on a year ago. In fact, at 1.15pm yesterday, UK shoppers spent a record-breaking £831,000 online in one minute. So while the cold weather shows little sign of letting up, it looks like the money’s online. Wonder if Santa’s elves can knock up a retail website?