Tesco and the slowdown

This year has been an odd one. The weather has been all over the place, and the markets the same. Now just when things are getting back to normal, at least with British teams faring disastrously at the rugby and cricket World Cups, Tesco comes out and reports a slowdown in sales growth. When the UK’s biggest retailer suffers a hiccup, you know something’s up.

Last Updated: 06 Nov 2012
UK like-for-like sales growth at the chain fell to 2.4% in the second quarter of the financial year, after rising 4.7% in the first quarter. Excluding petrol, Tesco reported like-for-like growth up 3.5% versus 6.6% in the same period last year. The company blamed the ‘unseasonably cold, wet weather’ of June and July. Which of course may be valid. But it doesn’t alter the fact that when even Tesco is saying something is amiss, then the rest of the high street really must be getting the willies.

Of course it’s not exactly a terrible performance. Overall, pre-tax profits rose by 18% to £1.2bn and sales increased by 9.2% to £24.7bn, helped by a strong performance from its online business, Tesco.com, from non-food sales and from its China business.

But it isn’t exactly out of the woods yet. The competition commission enquiry into its monopoly of the high street is still pending, and the chain is just a few weeks away from leaping into the potentially troublesome US retail market. The name of its US stores? Fresh and Easy. A name that certainly wouldn’t be apt for the UK retail market right now.

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