Competition is hotting up in the supermarket sector.
Tesco (LSE: TSCO) released its third-quarter statement on Tuesday, describing sales growth as "solid". Overall group sales grew 8.8% for the 13 weeks ending 28 November, with international sales rising by 12%, all excluding petrol.
Solid
However, like-for-like sales, which do not include sales from new store openings or from Tesco's recent expansion in its personal finance offerings, rose only 2.8%. That's still a healthy rise, but it was slightly smaller than the previous quarter's 3.1% rise. As Tesco pointed out though, inflation has fallen during the period, and that will probably account for most if not all of that declining growth.
Such trifles appear to be taken seriously by Tesco shareholders, and the share price was down nearly 3% at the time of writing. But that was after quite a surge in the past six weeks, so maybe investors had set up unrealistic expectations of forecast-busting results -- short-term movements in investors minds are no more predictable than share prices themselves.
Tesco Bank is, apparently, making good progress in developing its infrastructure, and its number of customers is growing. At the same time, last year's growth in bad debts is reported to be stabilising, with the overall bad debt level being below the UK average.
There was no specific word about profits, and we were simply told that everything is in line with expectations for the full year.
The shoppers are back!
In related news, the latest TNS Worldpanel grocery market share figures, covering the 12 weeks to 29 November, paint an optimistic picture for the supermarket sector's more upmarket players, with current trends suggesting the UK's recession-led belt-tightening phase might be coming to an end.
With grocery inflation falling, premium food ranges (including Tesco Finest) have been buoyant, while the "pile 'em high, sell 'em cheap" end of the sector, including the likes of Lidl, Aldi, and Netto, has been stagnating.
That should make the Christmas quarter well worth watching, especially as Tesco Mobile (powered by O2) will shortly be launching the Apple iPhone.
Dark stores?
Tesco is also planning to open a string of "dark stores", which will be as devoid of customers as the infamous cheese shop was of cheesy comestibles. But despite the melancholy moniker, the purpose of the stores is nothing more nefarious than to support Tesco's growing demand for online shopping. Arranged like conventional stores (but, of course, without all the advertising and with no checkouts), the dark stores will only be used by Tesco workers, filling trolleys with the goods needed to satisfy around a thousand orders a day.
With two already open, Tesco aims to open one new dark store a year, and expects them to account for around 15% of the company's online business by 2014. Who knows, if online shopping continues to grow, maybe one day the unseen dark stores will account for the bulk of the Tesco universe.
A surprise move?
And it looks as if the same attack might be happening in reverse as, according to the Sunday Times, ace online retailer Amazon is apparently planning to start opening real bricks-and-mortar stores. Amazon has since issued a denial, but it's certainly an interesting idea.
As growth in Amazon's traditional market of books, CDs and DVDs is leveling off (and both are threatened, longer term, with being eclipsed by online content -- with Amazon's Kindle book reader itself providing competition for real paper books), the company is increasingly moving into higher-value and bulkier products that just won't fit through our letterboxes.
And finally...
Just when we thought there were enough supermarket chains competing for our pennies, along comes another in the form of Asco.
Its managing Director, Dave Laney, believes that the presence of vacant retail sites dotted around so many city centres provides an opportunity to establish a presence quickly and cheaply, and Asco has plans to open 30 stores over the next three years, starting with its first one in Warrington.
I'm not so sure about that name though. Are we to expect the launch of Morrisbury's soon, or Fortnum & Spencer?
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