Christmas season fails to deliver for Tesco and M&S

Two stalwarts of the British and Irish retail trade – Tesco and Marks & Spencer – have admitted that the Christmas period had failed to deliver a much-desired festive trading boost.

Tesco, which is almost two years into a turnaround plan for its UK business, said more shoppers had turned to discounters and upscale rivals for their Christmas treats. Marks & Spencer revealed a tenth quarterly decline in clothing sales and disappointed analysts with its food performance.

Neither chain was prepared to offer an update on their Christmas performance in Ireland, but both chains are known to be facing tough conditions here also, with Tesco in particular fighting against loss of market share.

In the UK, Tesco’s same-store sales fell 2.4 per cent on the previous Christmas period, excluding fuel sales and VAT, while in the rest of Europe, including the Republic, like-for-like sales including VAT but excluding petrol were 1.6 per cent weaker.

Discounters
Tesco lost about 1 percentage point in UK market share last year to discounters Aldi and Lidl and to upmarket Waitrose. In the Republic, data from research firm Kantar Worldpanel has shown a similar trend, with Tesco losing ground to Dunnes as well as to the discounters.

Its market share has declined from close to 30 per cent to 26.5 per cent.

“These results were driven primarily by a weaker grocery market,” Tesco said yesterday.

Tesco’s declines contrast with Christmas gains reported in the UK by Lidl and Waitrose. Lidl this week reported its best UK performance to date over the Christmas period with “huge” increases in sales of premium own-label Deluxe products.

At Marks & Spencer, heavy pre-Christmas clothing discounts had little positive impact, with non-food sales at UK stores open at least a year falling 2.1 per cent in the 13 weeks ended December 28th. Food sales rose 1.6 per cent on the same basis, less than the 2 per cent anticipated by analysts.

Clothing competitors Next and House of Fraser reported growth, both benefiting from online growth.

“This has been a challenging quarter for the general merchandise market, with unseasonal conditions and higher-than-ever levels of discounting,” the company said in the statement, adding that it responded to an increased level of promotional activity in the market with discounts of its own.

International sales at Marks & Spencer on a constant-currency basis were 4.5 per cent over the quarter and 8.2 per cent stronger over the eight-week Christmas period, but no breakdown of this was offered. – (Additional reporting Bloomberg)