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Tesco same-store sales drop in home market
June 10th, 2013
LONDON – Tesco PLC’s domestic sales rebound appears questionable after the company reported a decline in same-store sales during its first quarter.
Same-store sales in the United Kingdom, excluding fuel and value-added tax, declined 1% during the quarter ended May 25. Analysts had expected a decrease of 0.5% to 1%. The world’s third-largest retailer had achieved a 0.5% increase during the fourth quarter of 2012.
Management blamed the decline of weak demand for general merchandise as consumers cut back on discretionary spending.
While some analysts questioned whether the retailer will be able to maintain its operating margin of 5.2% in the United Kingdom, others were more upbeat.
"As anticipated, Tesco posted a drop in U.K. like-for-like sales primarily due to subdued general merchandise sales — which continue to struggle in a challenging trading environment," comments David Gray, retail analyst at Planet Retail. "Even so, there are signs the food business is trading broadly in line with the rest of the market — driven by improvements to ranges and product quality."
Gray says that Tesco should benefit from the relaunch of its premium Tesco Finest private label and its mid-tier Tesco brand.