Tesco decline is ‘worst in 40 years’
09:40 04 June 2014
Tesco boss Philip Clarke unveiled a deepening sales decline today that he admitted was the worst he had seen in four decades at the supermarket.
The retailer posted a 3.7% drop in like-for-like sales for the first quarter to May 24 as it battled with intense competition from discount rivals amid a continuing upheaval in customers’ shopping habits and a squeeze on household budgets.
It was the third quarter in a row of worsening falls and Mr Clarke, who is in his 40th year at the store after working his way up from the shop floor, warned there was no prospect of an end to the gloom any time soon.
He said: “There hasn’t been a quarter of like-for-like sales like this before that I can remember, but I’ve never seen a period of such intense transformation for the industry.”
Tesco, like its rivals, is facing a squeeze from discounters Aldi and Lidl and latest industry figures show its market share has declined steeply.
It has responded by investing in price cuts on “the products that matter most” - and Mr Clarke said sales volumes had risen 28% in these areas, with more cuts to come. The retailer is also in the midst of a “refresh” programme to update stores.
Other changes include a cut in delivery charges while click-and-collect has been made free and a Clubcard Fuel Save offer has been extended across the country.
The chief executive said Tesco was “more competitive than we have been for many years” but warned that intensifying efforts on price and refurbishment continued to impact on like-for-like sales performance.
He said: “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.”
The latest decline comes after drops of 1.4% and 2.9% in previous periods.
Mr Clarke insisted the group had expected to see like-for-like sales worsen as it sought to invest in “delivering real benefits for our loyal customers”, with permanent price cuts targeted rather than short-term promotions.
“Loyalty is the prize worth having and we are putting our effort behind that,” he said. “Our plan is about positioning Tesco for the future.
“I know it’s going to take time for changes to stop weighing on our performance.
“We have got positive momentum in the business and we can see underlying how the strategy will return us to growth.”
The chief executive refused to be drawn on when sales would start to increase again.
He said: “I see every day the improvements that are coming in the business but I am not making any promises about sales improvements in the next few quarters.”
Mr Clarke pointed to a shift in shoppers away from the “one-stop shop” of out-of-town stores towards convenience outlets - where he said Tesco Express saw a quarterly improvement - and the internet.
He also pointed to years of decline in real-terms wages squeezing consumers and argued that, despite recent signs of optimism, “for the majority of customers it is not getting into their pockets”.