LONDON: Tesco, Britain’s biggest retailer, said sales growth slowed in its latest quarter, blaming a subdued overall market that has been hampered by poor early summer weather, sending its shares lower on Thursday.
Shares in Tesco fell as much as 3.3 per cent in early trading after the group said UK like-for-like sales rose 0.4 per cent in the 13 weeks to May 25, its fiscal first quarter. The stock had risen 20 per cent this year prior to the update and made up most of the lost ground in the first hour of trading.
Although that was a 14th straight quarter of growth and within the range of analysts’ forecasts of flat to up 1 per cent, it marked a slowdown from growth of 1.7 per cent in the previous quarter.
Tesco Chief Executive Dave Lewis said the group had outperformed the wider UK market on both a sales and volume basis, thanks to improved ranges and lower prices. But he acknowledged a tougher market.
Recent industry data has shown all of Britain’s big four grocers continuing to lose market share to German-owned discounters Aldi and Lidl.
“When I look at look at the core food categories, we don’t see any change in (consumer) behaviour but we do see a change in behaviour around the weather, the seasonal products — be that clothing, be that some of the seasonal general merchandising,” he told reporters.
“I have to put that down to weather rather than that consumer confidence element which is clearly there,” he said.
Lewis said there had been some weakening in consumer sentiment in the UK. Britain was due to leave the EU in March but that has been pushed back until October 31 after lawmakers rejected Prime Minister Theresa May’s negotiated settlement.
Lewis also pointed to a hard comparison with the same quarter last year, when Britain enjoyed hot weather and major events including a royal wedding.
In Tesco’s second quarter, the year-on-year comparison will not ease, given last summer’s heatwave and the men’s soccer World Cup which boosted demand.
“We do sense that those tough comparatives and awful June weather may mean that the Q2 UK out-turn, at least, could be tougher,” said Shore Capital analyst Clive Black.
Morrisons last month missed quarterly growth forecasts, blaming political and economic uncertainty and the third-largest player, Asda, warned of an “increasingly challenging backdrop”. — Reuters
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