The world third largest retailer Tesco has posted a like-for-like sales fall of 2.4 per cent across the Christmas period. Trading improved in Europe but remains challenging in Asia. The retailer is aiming to open more Express stores in 2014 in a bid to relieve market pressure from discounters Lidl and Aldi.
Here’s what analysts and consultants made of the results.
Bryan Roberts, Kantar Retail’s Insights Director:
“Tesco’s decline in like-for-like sales this Christmas comes on the back of some reasonable comparatives in the previous year, cut-throat competition in a polarised market and signs that Tesco’s recovery initiatives are taking time to impact shopper perceptions.
“Tesco’s unrivalled strength in online and convenience continues to pay dividends, but – as Tesco is aware – it needs to accelerate the overhaul of its larger stores to turn around negative trends in traffic and spend. It has made some impressive progress in private label, but arguably needs to improve promotional clarity, execution and marketing.”
George Scott, Retail Consultant at Conlumino:
“While positive strides are being made, particularly in relation to stores and product, this update will only intensify scrutiny of CEO Philip Clarke’s turnaround plan to Build a Better Tesco, with the benefits yet to bear fruit.
“On the face of it, a worse-than-expected fall in domestic LFLs suggests Tesco’s broad positioning is still overexposed, lacking conviction in a polarised market. In the wider context of declining real disposable incomes, Tesco’s performance is typical of the sector; as the only Big Four player to increase market share in recent times, even rival Sainsbury’s slumped to a minimal LFL increase (+0.2%) over the period. Indeed, in this climate of hard-fought wins, the biggest grocers have generally been drawn into more abnormal discounting to regain traction, which has undoubtedly dragged on sales growth.
“Nonetheless, Tesco’s self-help plan is showing signs of progress in the UK. It continues to focus on providing a better place to shop through a more engaging and service-led store environment. Indeed, by the end 2013 just over a tenth of its estate had undergone refurbishment, which has led to sales uplifts as high as 7%.
“However, it is in multichannel capability where Tesco is really making ground. Over three million online orders where made over the six week festive period, with one third of all online orders placed on a mobile device. Indeed, though Tesco’s market share losses in overall grocery have been well documented, Conlumino estimates that Tesco has a share of near to 50% of the online sector, which despite its relative maturity, has been growing at faster rates than the younger offer of peer Sainsbury’s.
“While focusing on self-help in its core domestic market, Tesco continued to experience difficulties on the international front, with total sales abroad declining 0.7% over the period. Despite consolidating its presence, sales in its Asia business grew by just 0.6%, with political uncertainty in Thailand offsetting marginal gains in the more stable Korea. Closer to home, in Europe, things have been rosier. Though total sales fell 0.8%, LFLs improved across all geographies from Q3, including positive growth in Poland and Hungary.”
Phil Dorrell, director of the retail consultancy Retail Remedy:
“Such woeful Christmas numbers show Tesco is still stuck in a deep rut. If the ailing giant’s third quarter was desperate, its Christmas was dire. Tesco’s UK like-for-like sales – excluding VAT and petrol – shrank by 2.4% over the festive period.
“That’s considerably worse than its lacklustre third quarter performance and the clearest indication yet that the chain’s £1 billion turnaround package isn’t working.
“Freed of its misfiring American stores, its internati