Buoyant Sainsbury's figures add extra woe to Tesco which reports second quarter pre-tax profit fall of 7.4%
Tesco and Sainsbury’s have released contrasting second quarter trading updates with the former having claimed that its like-for-like sales were ‘held back’ due to its transformation to higher-margin, higher growth categories, while Sainsbuy’s saw a growth of 2.1 per cent growth.
The sales for Tesco grew by 1.7 per cent (including petrol), with UK margin up by 5.2 per cent and UK food sales growing by 1 per cent, delivering an underlying pre-tax profit of £1,466m, down by 7.4 per cent on the same period last year.
Tesco did however see strong growth in online grocery figures, up by 13 per cent in UK and improved by 54 per cent overseas.
Meanwhile, Sainsbury’s saw its online sales grow by 15 per cent, to be worth over £1bn to the supermarket, with total sales including petrol up by 5 per cent for the second quarter.
Justin King, CEO of Sainsbury’s, said that the company was delivering “strong sales” and was outperforming the rest of the market, which raimed “tough”.
“Our own-brand offer continues to grow at over twice the rate of branded goods, with ‘Taste the Difference’ growing particularly strongly and by Sainsbury's performing well following its re-launch,” he continued, before highlighting the online sales figures and the growth of its convenience business by one fifth. He also revealed that it would continue to focus on high quality within its own-brand products in the build up to Christmas.
Tesco, meanwhile has announced a partnership with China Resources Enterprise, which will give it a 20 per cent stake within the country’s largest food retail business, and create a combined business of 3,000 stores.
In reference to Tesco, Phil Dorrell, director of retail consultants, Retail Remedy, said that the UK's bigger retailer was having "a truly terrible time".
"It's easy to argue that the demographic profile of Tesco's customers means they have been more harshly affected by the economic downturn than Sainsbury's," he continued.
"While this may be a slight factor, it is not the primary cause of Tesco's problems. It all started to go wrong for Tesco when it diverted attention to pet projects like America, land-grabbing and tertiary non-food ventures, under the leadership of the now-maligned Terry Leahy.
"Europe, meanwhile, as Tesco tries to take off in the UK, is acting like a deadweight. When Sir Ian MacLaurin stands up at the AGM from the floor and lays into his former protege you know things have turned sour.
"Tesco is nearly through their £1bn rejuvenation investment into their stores. It was needed but we are yet to see a step change in the way they engage with their customers because of it. The stores still look flat, the marketing old hat and the Dunhumby relationship has run out of steam, or at least ideas. Tesco is lucky that they have a huge portfolio of the sexiest game in food retail, the convenience store. This is where their growth is coming from and no doubt where Aldi and Lidl are least effective," he continued before predicting another 18 months of 'mixed results' for the company.