Tesco suffers another sales fall as key Asia market also falters

Tesco announced a 0.9 per cent decline in like-for-like UK sales excluding VAT and petrol in the 13 weeks to November 26, equal to the drop seen in the previous quarter.

Despite the decline, the grocer said the results of its Big Price Drop, which saw the cost of 3,000 everyday products slashed, were “promising” as food volumes rose by a whole percentage point, offsetting the deflationary impact of its price cuts.

Elsewhere, Tesco saw a significant slowdown in Asia, which has driven the overall group performance in previous months.

Kate Calvert, retail research analyst at Seymour Pierce, called the update “uninspiring”.

She said Tesco’s use of the word “promising” to describe the early results of its Price Drop strategy was not “particularly encouraging language”.

Tesco helped pay for its price cuts by slashing the number of multi-buy promotions and scrapping its double Clubcard points reward offer.

The offensive triggered an aggressive response as competitors responded with their own schemes, such as Sainsbury’s Brand Match campaign and Leeds-based Asda’s move to bring petrol prices down.

Tesco’s market share slipped to 30.5 per cent in the 12 weeks to November 27, from 30.7 per cent a year ago, researchers Kantar Worldpanel said this week, but customer numbers were still up.

Chief executive Philip Clarke said: “Times are tough for a number of our customers at home and in a number of our international markets.”

The grocer said it had seen an improvement in the decline in its like-for-like sales of non-food items.

It reported strong performances in the home and electricals sectors, offsetting a weaker show from CDs and home entertainment categories.

Tesco said it had seen strong performances in new stores, as total sales including VAT and petrol grew by 6.7 per cent in the period, while online sales increased by 10 per cent.

The group’s Asian powerhouse market faltered in the quarter due to a number of temporary factors hitting sales.

In Thailand, like-for-like sales slowed from 7.5 per cent to 1.4 per cent as devastating floods forced the closure of 165 stores across the country.

Meanwhile, the warmest autumn in northern Asia for 75 years affected seasonal merchandise sales, particularly in South Korea, where same-store sales slowed from 0.9 per cent growth to 0.3 per cent.

The group’s Chinese stores reported a 3.4 per cent increase in like-for-like sales, compared with 6.1 per cent last year.