Tesco sales fall 3.9% in 4 months

TESCO is struggling in Ireland with sales falling 3.9% over the last four months.

The supermarket, which is the largest in the Irish and British markets, said that things are improving in Britain but it warned that high fuel costs are continuing to discourage consumer spending.

Tesco posted a 0.1% drop in same-store sales excluding fuel and VAT in the 13 weeks to May 28, up from a 0.7% fall in the previous quarter. Total British sales including fuel and VAT were up 7%.

The company said that food sales performed well, with meat, fish and poultry recording good growth in Britain but there was a decline in non-food areas.

In Europe, sales excluding petrol grew by 9.5% with sales strong in the Czech Republic and Slovakia. The company pointed to a weaker trend in Ireland offsetting improved like-for-like growth across Central Europe and Turkey.

Sales in Ireland fell by 3.9% compared with a fall of 0.2% in the previous quarter.

Other figures released recently by Kantar Worldpanel do not paint such a dismal picture for Tesco in Ireland showing growth slightly ahead of the market in Ireland in the 12 weeks to May 15 and posting an increase in market share from 27.1% last year to 27.3%.

Sales of electronic items, which account for about a third of all non-food sales, are still “down and struggling,” chief financial officer Laurie McIlwee said.

Chris Hogbin, an analyst at Sanford C Bernstein said the numbers are “modestly disappointing”. He said improvements in non-food ranges “won’t happen overnight”.

Mr McIlwee said customers are cautious and many are shopping on a smaller budget due to fuel prices.

International sales including petrol rose 2.8%.

In the US where same-store sales climbed 11%, internal expectation is for double-digit growth to continue, Mr McIlwee said&.

“International growth is solid whilst the US should reassure investors focused on the break-even point,” Matthew Truman, an analyst at JPMorgan Cazenove said.