Tesco suffers weakening consumer confidence

UK's biggest retailer Tesco has reported its first slowdown in underlying sales for two years, revealing that it too is subject to weakening consumer confidence, reports the FT. Finance director Andy Higginson said that the 5.5 percent underlying sales growth in the 14 weeks ended 19 November, compared with 6.6 percent in the previous quarter, was "very strong" when seen in the context of the company's "longer-term historical performance".

Although the food sector performed steadily, the non-food sector has felt the effects of lagging consumer confidence. Growth in non-food sales was below last quarter's 13 percent, although still up in the double digits. Half of all the new space in the UK consisted of non-food. The company said that non-food now accounted for 6.5 percent of total group sales. Higginson said that Tesco planned to open four more non-food Tesco stores in a bid to expand that sector, and added that the company was "sensibly cautious but confident" about Christmas.

Despite the slowdown, Tesco - with a market share of 32 percent - still outperformed the three other big supermarkets. "That 5.5 percent rise (in underlying sales) is twice the size of Sainsbury's growth," Andrew Fowler, analyst at Merrill Lynch, told the Financial Times. Sales in the UK rose 11.6 percent, up from 10.9 percent last quarter. Higginson said that 3.7 percent of that was generated by new stores. With Tesco continuing to cut prices, price deflation was 1.6 percent. International business was "slightly ahead" of expectation, with sales rising 16 percent.