Tesco Christmas sales improve but company to shut 43 stores

Group sales for the 19 weeks to January 3, 2015 declined by 0.6 percent at constant rates, including fuel and 1 percent excluding fuel. At actual rates, sales declined by 1.9 percent including fuel and by 2.3 percent excluding fuel. The company delivered an improvement in performance across the period.

Total UK sales including VAT and fuel declined by 0.7 percent compared to a decline of 3.2 percent in the second quarter, and decreased by 1.3 percent excluding fuel. Like-for-like sales excluding fuel decreased by 2.9 percent, compared to a decline of 5.4 percent in the second quarter. This included a gradual improvement through the third quarter and resulted in a like-for-like sales performance of 0.3 percent for the six-week Christmas trading period.

However, Tesco has said that it will pull shutters on its 43 unprofitable stores across the UK, a significant proportion of which will be local convenience shops. The company has also decided against opening a further 49 new large stores. Additionally, Tesco is closing its staff pension scheme and will make cuts of 250 million pounds (378 million dollars).

Commenting on the update, Dave Lewis, Chief Executive said, “A broad-based improvement has built gradually through the third quarter, leading to a strong Christmas trading performance. In difficult circumstances the team has begun the challenging task of reinvigorating our business. There is more to do but we have taken the first important steps in the right direction. We have some very difficult changes to make. I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation.”

Overall general merchandise performance stepped up to positive like-for-like sales growth over Christmas helped by the success of seasonal and gifting ranges. Black Friday promotions resulted in the highest week of sales on record for Tesco Direct, contributing to 22.2 percent like-for-like sales growth in online merchandise for the Christmas period. Customers also benefited from a strong offer in convenience and online grocery businesses over the seasonal period, resulting in like-for-like sales growth of 4.9 percent and 12.9 percent respectively.

In Asia, total sales declined by 1.5 percent at constant rates, with like-for-like sales declining by 4.6 percent. Market conditions across the region remain challenging. In Thailand, sales trends improved over the period. In Korea, a higher number of enforced Sunday closures under the DIDA opening regulations affected the performance of all large retailers. In Europe, total sales increased by 0.4 percent at constant rates. The like-for-like sales performance for the region, though still held back by our performance in Ireland, improved from 2.5 percent in the second quarter to 1.2 percent in the third quarter. Further improvement in all markets resulted in positive like-for-like sales growth of 1 percent for the Christmas period.