Blow for Tesco as festive sales hit

Jan 14 2009 by Iain Laing, The Journal

TESCO has reported its worst Christmas in almost 20 years as it wrestled with difficult markets at home and abroad.

In the UK, its like-for-like sales growth of 2.5% for the seven weeks to January 10 was in line with muted City expectations but much weaker than rival Sainsbury’s.

Finance director Andrew Higginson said Tesco’s UK Christmas trading figure was the weakest “probably since the last recession”.

The group’s discount ranges – launched last year to combat rivals such as Aldi and Lidl – were behind the sales decline, although Tesco said the move continued to drive an increase in volumes and customer numbers.

He said: “In a price sense we are very competitive in the market now ... so we are happy with our position.”

Despite the tougher conditions Tesco will continue to invest in the UK market and its store opening programme will create 10,000 jobs this year, Mr Higginson added.

The supermarket hopes the extra custom driven by its discount ranges will offset the sales blow, but its growth is just over half the 4.5% posted by Sainsbury’s last week.

Morrisons has yet to report, although it is set to be the Christmas winner with sales growth of around 9%. Wal-Mart-owned Asda is expected to produce an advance of at least 7%. There were some glimmers of light for Tesco as the group’s non-food sales strengthened slightly against the third quarter, with market share gains across electrical, clothing and entertainment categories.

Total online sales from tesco.com and Tesco Direct were up more than 18% to £273m, with sales of digital products such as televisions and laptops “particularly pleasing”.

Rival Morrisons has achieved its highest ever market share. Resurgent sales helped the group take a record 11.9% share of the market in the final quarter of 2008.

But discounters once again banked the biggest rise in market share, with Aldi’s market share up from 2.7% to a new record for the group of 3.2%.

However, Waitrose lost further ground over the full quarter, with another drop in market share, from 3.9% to 3.7%.