Turnaround plan on track, despite falling sales: Tesco chief, Philip Clarke
03 Oct 2013
Tesco chief, Philip Clarke, has insisted his turnaround plan for the UK's biggest retailer was on track despite declining worldwide sales and profits.
The retailer yesterday reported an unprecedented fall in like-for-like sales across all its 10 international businesses in the first half of the year.
In the UK, like-for-like sales were down by 0.5 per cent in the 26 weeks to 24 August, which was significantly behind the 1.4 per cent growth reported by rival J Sainsbury.
Additionally, like-for-like sales were down by 3.7 per cent in Asia and 5 per cent in Europe, as Tesco warned of volatile economic conditions in countries including Poland, Ireland and Thailand, as hopes of a sustained global economic recovery receded.
The problems in Europe led to a 68-per cent decline in trading profits on the continent, far larger than expected, with the retailer investing millions of pounds into its ailing Polish arm.
Shares in the retailer were down by over 4.5 per cent in early trading, but recovered later to close down 1.10, or 0.3 per cent.
Despite another fall in UK sales, according to Clarke, the company's performance in the UK had ''strengthened'', with sales of food increasing in the second quarter by 1per cent and sales in Tesco's revamped supermarkets growing by up to 5 per cent.
Tesco also saw margins come under squeeze, in what was already a notoriously competitive retail environment. Group profit margins slipped from 5.4 per cent to 4.9 per cent.
Sainsbury's was the only one of the "big four" supermarkets to see its market share increase in the 12 weeks ending 15 September, according to the latest figures from Kantar Worldpanel. Its market share increased 0.2 per cent to 16.6 per cent.
In the period, Tesco's market share declined to 30.2 per cent from 30.9 per cent over the period, although it continued to be considerably larger than its nearest rival Asda, which had 17.3 per cent of the market and also saw its share drop.
Last year, Tesco announced it would be spending £1 billion on improvements at it stores in the UK, with investments in shop upgrades, product ranges, additional staff, as also its online offering.
Apart from its traditional competitors, the firm had been fighting an increasingly tough battle with discount supermarkets such as Aldi and Lidl.
Pre-tax profits at Aldi increased 124-per cent to £157.9 million in 2012, with the company saying it attracted a million more shoppers through its doors.
