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Horse meat scandal helps Tesco record 1% sales decline in UK

Tesco has claimed that its 'Building a Better Tesco in the UK' strategy is on track however the Horsemeat DNA discovery within some of its frozen meals helped it record a 0.9 per cent decline in UK sales, while European sales were down by 5.5 per cent.

As it reported a 1.6 per cent decline in UK sales including petrol, the supermarket chain has also claimed that its online delivery services is outperforming the rest of the UK market and was its fastest growing channel, while it has also continued to roll out its Click & Collect grocery service that now has 169 locations cross the UK.

Another recent introduction, the Price Promise automatic price comparison coupon-at-till service had proven to be 'highly popular' the company claimed.

Tesco Bank saw a decline in sales of 2.3 per cent, while plans to relaunch the supermarket's core range of general merchandise in smaller format stores within the coming months are to be followed by 'a more extensive repurposing' of general merchandise and electrical space within larger stores later this year.

Refreshing its Express stores was another activity undertaken this year with nearly 40 relaunched during the first quarter, with over 100 Express stores and around 70 Superstores also involved, as well as initial work on its Extra format.

Philip Clarke, CEO of Tesco explained that the company set out an approach for growth and returns for the business, as well as realistic objectives, however admitted that there had been an impact on frozen and chilled convenience food sales following the discovery of horse DNA in four beef products which were withdrawn and reintroduced using new suppliers.

"Importantly to the objectives we have set out for sustainable and disciplined growth, customer perceptions are improving across all aspects of the shopping trip in the UK, driven by continued progress on our plans to 'Build a Better Tesco' and our market-leading multichannel offer.

"We have set out our plans to put customers back at the heart of the way we do business, and this is particularly evident in our recent initiatives on price and on food trust. Customers across the UK are embracing Price Promise and we are encouraged by performance in our core fresh food categories and uplifts from refreshed stores."

Clarke added: "Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year. Whilst we are not expecting economic conditions to improve in the near term, we have a customer-focused plan for the year in each of our markets which takes this into account, and we will maintain a disciplined approach to investment and cash flow as outlined in April."

In response to the first quarter results, John Ibbotson, director of retail consultants, Retail Vision said that: "Declining non-food sales coupled with growing competition from a resurgent Sainsbury's and discounters like Aldi have been a major drag on performance."

He continued: "While Philip Clarke has revamped the management team, refreshed the stores and taken some tough decisions, specifically withdrawing from America, this is clearly no guarantee of getting Tesco UK back on the road to growth.

"The uncomfortable reality for Clarke is that Tesco's 30 per cent market share in the UK will be hard to grow even with the return of consumer confidence and economic growth.

"Tesco will have to adjust to low growth and look for return on investment.

"The good ol' days of globe-trotting and high growth are over. Tesco may yet be able to Build a Better Tesco but a Bigger Tesco, maybe not.

"The stellar progress of the international operations may also be over, threatened by increased competition, market saturation and government interference. South Korea, Poland, the Czech Republic and Turkey are all under the cosh."

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Stephen Lepitak

Stephen Lepitak is editor of The Drum, with responsibility for overseeing the day-to-day running of the content produced for the various platforms run by the publication. Over the years he has interviewed agency network bosses such as Sir Martin Sorrell, Maurice Lévy and Arthur Sadoun, as well as Cindy Gallop, Kim Kardashian, film directors James Cameron, Spike Jonze and producers Harvey Weinstein and Lord David Puttnam. With a keen interest in media and breaking news, Lepitak has been with The Drum since 2005 and is based across its UK, US and Asia operations.

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