Wednesday, January 23, 2019

Tesco “too expensive” for consumers as sales slump again


Tesco has revealed its worst quarterly results since chief executive Philip Clarke took the helm as UK like-for-like sales fell 3.7 per cent.

Tesco, like its main rivals Sainsbury‘s and Morrisons, is being squeezed by high-end retailers such as Waitrose and discounters Aldi and Lidl.

LFL sales fell 3.2 per cent, International by 2.2 per cent and Europe by 1.1 per cent. The sales slump was worse than analyst‘s expectations and it is becoming clear that Tesco are losing the price war with rival grocers. Clive Black, analyst at Shore Capital said its position was now “dangerous and untenable.”

“We believe that Tesco UK is increasingly perceived by more and more customers as simply too expensive,” he warned.

Chief executive Philip Clarke, who has been compared to former Manchester United manager David Moyes in the press, has invested £200m in price cuts on “the products that matter most” and has refreshed 100 stores. However, many believe he should simplify its complex multiple buy offers and sacrifice gross margin to better compete with rivals.

The grocer hopes that lower delivery and online charges will tempt customer back to shop with it but could face stiff competition if rivals Lidl and Aldi launch online shopping in the near future.

Clarke commented: “We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers. We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole.”

Despite the gloomy UK figures, trade improved slightly in Asia while Tesco stock rose 1.3 per cent in early trading on the FTSE 100 this morning with many forecasters saying its performance had been slightly better than expected.


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