The UK’s largest supermarket Tesco has blamed rising petrol prices for a like-for-like (LFL) fall in trading during its first quarter.
LFL sales excluding petrol and VAT were down 0.1 per cent year-on-year in the 13 weeks to May 28th 2011, an improvement on the 0.7 per cent decline reported in the final quarter of the previous financial year but below analysts’ estimates of around +0.5 per cent.
In an interim management statement published today, the grocer said that high fuel costs are causing its customers to direct their spending towards running their cars at the expense of their weekly shop and suggested that this was a drag on both industry and LFL sales growth during the period.
Other trends noted during Q1 included a general weak consumer demand, particularly in general merchandise, although Tesco’s branded grocery products are also seeing good growth, with its Finest range up by almost ten per cent on a LFL basis.
Total sales in the UK excluding petrol were up by 4.9 per cent, while last week it announced that it intends to introduce a new click & collect service for groceries as the business makes further additions to its multichannel offering.
Following a refreshingly honest assessment of Tesco’s sluggish performance in the UK at the end of the last financial year, CEO Philip Clarke was much more positive about the latest period of trading and keen to highlight the grocer’s growth potential.
He commented: “We’re … making progress with our strategy: improving the shopping trip for customers; increasing productivity; winning market share - whilst at the same time investing for long-term growth in important new products, new space and in our online capability.”
Much of his confidence emanates from Tesco’s continued position as a successful global grocer with international sales performing well, especially in Asia where LFL growth was 3.2 per cent.
In Europe, poor trading in countries such as Republic of Ireland meant LFL growth slowed to two per cent but there was good news from its much maligned operation in the US, with Fresh & Easy reporting an 11.1 per cent rise in LFL sales.
Commenting on Tesco as a global retailer, Clarke said: “Tesco has made a good start to the new financial year, despite consumer sentiment in many of our key markets remaining subdued.
“The overall performance of our businesses in Asia and Europe has again been pleasing, led by further strong growth in Thailand and across our central European region.
“Uncertainties remain but with early, encouraging signs of better performance emerging in both the UK and the US, I am confident that this start will provide the platform for another year of growth and rising return on capital employed for Tesco.”