Shares in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) fell by more than 12p, over 3.5%, in early trade this morning, following a mixed Christmas and New Year trading statement.
Walking the same walk and talking the same talk as rival Sainsbury’s with its rather gloomy forecast yesterday, Tesco warned of “challenging conditions in the UK market” — with the additional concern of matters abroad, including the recent political disruption in Thailand.
But most worryingly for investors, Tesco saw a 1.2% decline (including petrol) in group sales for the six weeks to 4 January 2014 and, closer to home, revealed that like-for-like UK sales fell by 2.4%.
Management blamed the weaker grocery market, “the impact of a tougher comparative” as well as efforts spent transforming Tesco’s general merchandise offering and “significantly” reducing its new store opening programme, all of which have held back top-line performance.
There was some positive news, though. The supermarket took in over £1bn taken in the five days before Christmas, while chief executive Philip Clarke emphasised Tesco’s leading role in multichannel retailing: its internet offering fared well over the festive period, with online grocery sales up 11% and general merchandise up 25%, and total online sales up 14% thanks to £450m in just six weeks.
Additionally, management revealed positive like-for-like sales growth in its Tesco Express convenience stores, while at the other end of the spectrum it saw recently refreshed large stores “continuing to significantly outperform”.
Clarke remains confident in Tesco’s turnaround; the question is, will investors share his faith?
