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3 Quick Takeaways On Tesco PLC’s Q1 Results

Tesco (LSE: TSCO), the UK’s largest supermarket chain, reported falling sales for the third consecutive quarter this morning. In April the firm posted a 6% drop in annual profits, and the pressure is mounting on Philip Clarke, the chief executive.

Is time up for Clarke?

TescoLike-for-like sales at UK stores fell by 3.8% in the first quarter. Clarke, who is two years into a multi-billion pound turnaround programme, is focused on pricing strategy and a store refresh programme.

Sales volumes on items where Tesco has cut prices surged 28% — with Clarke commenting that this is “making a real difference for customers”. Tesco has refreshed 100 stores in Q1 and will refresh 200 more by the end of the first half of the year.

The fruits of these efforts are yet to be seen.

Tough market

The UK grocery market is more competitive than ever. Consumer spending remains subdued but Aldi, Lidl and Waitrose are managing to grow sales at a rapid pace.

Tesco’s imperative, then, is to build “long-term loyalty”. Tesco differentiates from its competitors with its ‘multichannel’ offering, and at the end of April it strengthened in this area by introducing free click & collect. So far the firm has fulfilled 100,000 daily orders on four occasions, which is a new milestone, and an improvement even on the Christmas period.

Share performance

Tesco has a 52 week high of 386p and a low of 279p. Tesco fell 1% to 294p during early trade this morning and the shares trade on a forward P/E of 11, which is within bargain range.

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The Motley Fool owns shares in Tesco.