Tesco blames the weather as growth in sales crawls

The UK's biggest supermarket said the heavy snowfall and freezing temperatures particularly hit its non-food offering, as customers were unable to travel to their larger stores.

Sir Terry Leahy, chief executive, said: "Our performance remains solid but was hindered in the run-up to the important Christmas trading period in the UK by the disruptive effects of the severe winter weather conditions."

Tesco's update for the six weeks to January 8 follows a stronger set of results from rival Sainsbury's, which delivered 3.6 per cent like-for-like sales growth over a longer trading period for the 14 weeks to January 8.

Fourth biggest supermarket chain Bradford-based Morrisons turned in a stronger performance in the six weeks to January 2, with like-for-like sales excluding fuel and VAT up one per cent.

Tesco maintained its market share in the 12 weeks ending December 26 at 30.5 per cent, according to researcher Kantar Worldpanel. Food sales grew 1.7 per cent on a like-for-like basis over the festive period, whereas non-food sales, which include electrical goods, entertainment and clothing, declined 1.5 per cent.

Laurie McIlwee, Tesco's group finance director, said the group estimates the snow reduced sales by one per cent but did not give a cash figure.

He added: "Most of the impact was in non-food sales – which were negative – and that's because customers could not get to the big out-of-town stores."

Within food, he said customers were "trading up" and buying the company's Finest range, with ham on the bone sales up 50 per cent, Finest party foods up 90 per cent and Finest wines up 100 per cent.

Tesco's total group sales increased by 7.6 per cent but this was driven by growth overseas.

Neil Saunders, consulting director at retail analyst Verdict, said the weather impact was only part of the picture when looking at Tesco's update.

"There are other factors at work," he said. "Foremost among them is the degree to which the expansion of rivals, especially in non-food, is eroding Tesco's growth poten-tial.

"As the largest player, Tesco has most to lose from the physical expansion of players like Sainsbury's."

He said that Tesco also suffered "something of a pincer movement" this Christmas.

"Some of its customers traded up to more premium grocers like Waitrose, Sainsbury's and M&S while some traded down to the likes of Asda and Morrisons.

"This erosion almost certainly dented growth and it indicates that Tesco needs to develop a clearer position to retain high spending customers."