Tesco, Britain's biggest retailer, reported its worst Christmas sales performance for decades and warned it would see minimal profit growth next year as it invests in winning back shoppers.
The world's third-largest stores group said today that it now expected minimal trading profit growth for 2012/13 against analysts' forecasts for a 10 per cent increase. It will cut back large store openings, while investing in the internet.
The supermarket group, which makes about 70 per cent of operating profit in Britain, said sales at UK stores open over a year fell 2.3 per cent excluding fuel and VAT sales tax in the six weeks to January 7th.That compares with an average forecast decline of 0.9 per cent in a Reuters poll of 17 analysts, though several had warned a lower figure was possible after weak market research data for Tesco on Tuesday.
It also puts the supermarket group on course to deliver its fifth straight quarter of declining underlying UK sales.
"We are disappointed with our seasonal trading performance in the UK," chief executive Philip Clarke said. "In a challenging consumer environment at home, and with early signs of more cautious behaviour emerging elsewhere, we have seen more strain than anticipated on our profitability during the important seasonal trading period."
Underlying profit before tax and earnings per share for 2011/12 would be broadly in line with analysts' consensus forecasts, it said, but group trading profit growth is likely to be around the low end of the current range.
Many British retailers are struggling as disposable incomes are squeezed by higher prices, muted wages growth and austerity measures, and as shoppers worry about a weak housing market, rising unemployment and fallout from the euro zone debt crisis.
Tesco, which takes more than one in every ten pounds spent in Britain's shops, has been suffering more than its main grocery rivals in part because it sells more discretionary non-food goods, where shoppers have been cutting back most.
British grocer J Sainsbury posted a 1.2 per cent rise in underlying sales yesterday.
Tesco tried to hit back in September with a plan to invest £500 million in lower prices. While it says this has attracted more customers, it has not been enough so far to offset the decline in cash taken at the till.
Tesco, which trails only France's Carrefour and U\d industry leader Wal-Mart by annual sales, said group sales rose 5.2 per cent, helped by growth in Asia, eastern Europe and the United States.
Reuters
