The domestic operations of the UK’s leading retailer Tesco continued to be a drag on its overall trading growth during the last three months, according to results released today.
First quarter trading figures for the firm reveal that UK like-for-like (LFL) trading, excluding petrol, over the 91 days to May 26th 2012 fell 1.4 per cent year-on-year, as group sales rose 2.2 per cent in total but declined 0.7 per cent LFL.
CEO Philip Clarke called the results “robust” and claimed that steady progress was being made in the UK following the initiation of the group’s six-point plan which was unveiled in April.
In the seven days leading up to the Queen’s Diamond Jubilee domestic sales climbed over £1 billion, which represented the supermarket chain’s biggest ever week outside of the Christmas period, while international sales continued to grow over the quarter, although at a slower pace, up 7.8 per cent at constant exchange rates.
Clarke said: “Tesco has performed robustly in the first quarter despite subdued consumer confidence in all our markets.
“We are rapidly implementing our six-point UK plan and I’m particularly proud of the relaunch of our Everyday Value range and the fact we have now put extra staff into 700 of our stores - in 500 of them within the last three weeks alone.
“Our customers are seeing the evidence of the changes we’re making and they’re telling us they like what they see.”
A total of 4,300 additional new staff members have been recruited in the retailer’s fresh food and beers, wines & spirits departments across all of its UK stores – 100 of which have been refurbished since the start of the year.
Neil Saunders, Managing Director of analyst group Conlumino, argues that Tesco’s new UK strategy is focusing on the right areas but much more needs to be done in regards to store refurbishments, customer service initiatives and brand refreshes if the business is to return to growth.
“From these results one message comes through loud and clear: there is no quick fix solution to the issues with Tesco’s UK business and a tremendous amount of work still remains,” he said.
Saunders also warns that the retailer’s international business is also showing signs of weakness, with its operations in countries such as Malaysia, South Korea, Czech Republic and Turkey all reporting LFL sales declines in Q1.
Trading across Asia rose nine per cent in total during the period, however while underlying sales were up year-on-year in almost all countries in the region they were actually down in the key market of China.
Phil Dorrell, Director at retail consultants Retail Remedy, believes that the main problem for Tesco is the lack of long-term strategy and he lays blames the current leadership of the business for this deficiency.
Dorrell said: “Nothing fundamental has changed in the way Tesco is marketing itself to its customers.
“Tesco still lacks a clear definition of its USP, continues to offer a bland and soulless shopping experience and will be hard pushed to maintain its market share over this financial year.
“The leadership still seems to be focused on the quick fixes, more appropriate to running a store than a business, and maybe this highlights the real issue.”