Tesco hit by weak consumer confidence

Tesco said it outperformed a "subdued" overall grocery market
Tesco said it outperformed a "subdued" overall grocery market
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Britain's biggest supermarket Tesco has blamed weak consumer confidence and volatile weather for a slowdown in first quarter UK sales growth.

The group reported UK like-for-like sales growth of 0.4 per cent for the 13 weeks to May 25.

Tesco said it outperformed a "subdued" overall grocery market, but the result marks a sharp slowdown from the 1.7 per cent growth in the previous three months.

Total UK sales were also under pressure, down 0.4 per cent as it was hit by its decision to close non-food arm Tesco Direct last July - a move which impacted sales growth by 0.8 per cent.

Across the UK and Ireland, comparable sales rose 0.8 per cent, down from 1.9 per cent in the previous three months.

Chief executive Dave Lewis said in addition to weaker consumer sentiment, there were also some challenges in the quarter around weather and tough comparisons with the previous year, when trade was boosted by events such as the royal wedding.

He added: "There's some weakness in consumer sentiment in the UK. Clearly part of that is down to the political situation. The other element is the weather."

Volatile weather in the UK in recent months has impacted sales of seasonal products, such as clothing.

However, UK online grocery sales proved resilient, up 7 per cent in the quarter.

Emma-Lou Montgomery, associate director ​at​ Fidelity Personal Investing’s share dealing service​,​ said:​ ​“The 0.8​ per cent​ rise in like-for-like sales says it all at Tesco. ​

"​CEO Dave Lewis may call the supermarket sector ‘subdued’ but what he really means is ultra-competitive. One of its fiercest rivals, Lidl, wouldn’t be opening 40 new stores in the south east in a less-than-buoyant market.

“The latest Kantar data shows that Tesco’s supermarket share is dropping - to 27.3​ per cent​ at the end of last month from 27.7​ per cent​ a year ago. Tesco knows the score and the focus has been clearly on ramping up its savings for cost-conscious customers.”

Tesco's total group like-for-like sales edged 0.2 per cent higher in the first quarter.

Tesco Bank saw a 1.9 per cent drop in revenues to £270m.

Talking about the recent decision to put its mortgage business up for sale, impacting 23,000 customers who collect Tesco Clubcard points through the home loans, Tesco said the process is still ongoing.

It added it was too early to comment on plans to offset any potential loss of Clubcard points to the borrowers.