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Tesco sales slow down in ‘subdued’ market

The group reported UK like-for-like sales growth of 0.4% for the 13 weeks to May 25.

Tesco has seen UK sales growth slow in its first quarter as it blamed weak consumer confidence and volatile weather (Steve Parsons/PA)
Tesco has seen UK sales growth slow in its first quarter as it blamed weak consumer confidence and volatile weather (Steve Parsons/PA)

Supermarket giant Tesco has seen UK sales growth slow in its first quarter as it blamed weak consumer confidence and volatile weather.

The group reported UK like-for-like sales growth of 0.4% for the 13 weeks to May 25.

The group said it outperformed a “subdued” overall grocery market, but the result marks a sharp slowdown from the 1.7% growth in the previous three months.

Total UK sales were also under pressure, down 0.4% as it was hit by its decision to close non-food arm Tesco Direct last July – a move which impacted sales growth by 0.8%.

Across the UK and Ireland, comparable sales lifted 0.8%, down from 1.9% in the previous three months.

Shares were 1% lower, having fallen 3% at one stage.

There's some weakness in consumer sentiment in the UK. Clearly part of that is down to the political situation. The other element is the weather Tesco chief executive Dave Lewis

Chief executive Dave Lewis said alongside weaker consumer sentiment, there had also some “challenges” in the quarter around weather and tough comparisons from a year earlier, when trade was boosted by events such as the royal wedding.

He added: “There’s some weakness in consumer sentiment in the UK. Clearly part of that is down to the political situation. The other element is the weather.”

Volatile weather in the UK in recent months has impacted sales of seasonal products, such as clothing, according to the group.

But UK online grocery sales proved resilient, up 7% in the quarter.

Total group like-for-like sales edged 0.2% higher in the first quarter.

Tesco Bank saw a 1.9% drop in revenues to £270 million.

On its recent decision to put its mortgage business up for sale, impacting 23,000 customers who collect Tesco Clubcard points through the home loans, Tesco said the process was still ongoing.

It added it was too early to comment on plans to offset any potential loss of Clubcard points to the borrowers.

Russ Mould, investment director at AJ Bell, said Tesco’s update was “about as good as could have been expected under the circumstances”.

“The build-up to last year’s World Cup and the sunny temperatures meant it was always going to be a tough ask to generate much like-for-like growth this time round as the UK endures some very soggy weather,” he said.

Clive Black, retail expert at Shore Capital, warned that the second quarter may not offer much of a bounce back for Tesco.

“Tough comparatives and awful June weather may mean that the second quarter UK out-turn, at least, could be tougher,” he said.

PA

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