Clarke says Tesco’s general merchandise sales are 'not good enough'

Tesco has this morning released a trading update for Q3, covering the thirteen weeks to November 24th.

Highlights from the publication follow, however the full release can be downloaded from our Industry Articles pages: http://www.insightdiy.co.uk/articles.asp

Group sales:

Group sales for the thirteen weeks ending 24 November 2012 increased by 2.4% including petrol at constant exchange rates (1.0% at actual rates) and by 2.9% excluding petrol at constant exchange rates (1.4% at actual rates).

UK performance:

Total sales including VAT and petrol grew by 1.7% and by 2.3% excluding petrol. Our like-for-like sales, excluding both VAT and petrol, reduced by (0.6)% in the quarter.

We have continued to make good progress on our six-part plan to Build a Better Tesco in the UK. As a result, like-for-like sales growth in our food business - the main focus of the plan to date - has improved to +1.2% for the quarter, outperforming the market. We are also pleased with the strong performance of our online grocery business, which delivered sales growth of 15%.

The six-part plan is still in its early stages but is already delivering an improved shopping trip for customers. Highlights in the third quarter include:

1. Service & Staff – 11 nationwide training events for managers and Making Moments Matter customer service training for 300,000 UK colleagues
2. Stores & Formats – nearly 300 stores now refreshed; new bakery departments now rolled-out to 850 stores
3. Price and Value – greater focus on personalised offers – Christmas mailing being sent to over ten million households
4. Range & Quality – 1,200 additional new or improved own-label products, including a complete re-launch of our meat and poultry categories and the completion of our chilled convenience food upgrade
5. Brand & Marketing – launch of our Christmas advertising campaign, our first working with W + K
6. Clicks & Bricks – over 110,000 customers now signed up to Delivery Saver subscription service; Grocery Click & Collect drive-through now in over 40 locations; over 1,500 stores now offering Tesco Direct Click & Collect for general merchandise

Like-for-like sales further reduced in general merchandise, which has led to a greater drag on overall UK performance in the quarter. While this partly reflects the continuing weakness in consumer demand that is being experienced by the market as a whole, we are renewing our efforts to deliver sustainable, profitable growth in this part of the business.

This includes stronger ranging, pricing and promotional positioning, together with a further
reallocation of space away from categories such as consumer electronics and home entertainment.

This will enable us to give even greater focus to categories such as clothing, nursery and home, which are delivering better top and bottom line growth.

Philip Clarke – Chief Executive said:

“I am pleased with the performance of our food business in the UK. Our six-part plan is about
improving the shopping trip for customers for the long-term and this is a positive early sign. We’ve now refreshed nearly 300 stores, upgraded or introduced well over 3,000 products and added innovations such as Delivery Saver to our already successful online grocery business - and there is plenty more to come in 2013.

“Our general merchandise performance overall in the UK was not good enough, and we are renewing
our efforts to deliver sustainable, profitable growth in this part of the business.

“We have seen a further weakening in consumer spending in Central Europe, although the effects of this have been partly offset by a better quarter in Asia.

“I am looking forward to the important seasonal period ahead, and am confident in our plans to deliver further improvements in our shopping trip for customers.”

Source : Tesco PLC
www.tescoplc.com