Retail: Tesco and Morrisons report slump in sales after a “challenging” Christmas
09:36 09 January 2014
Tesco and Morrisons both reported sharp declines in sales today after a “very challenging” Christmas for the supermarket sector.
Market leader Tesco said like-for-like sales were down 2.4% in the six weeks to January 4, while a fall of 5.6% at Morrisons led the chain to warn that its profits will fall short of some City hopes.
The latest downbeat figures from the sector come amid recent market share gains for discount rivals Aldi and Lidl, although Sainsbury’s and upmarket rival Waitrose have reported increased sales for the period including Christmas.
Tesco blamed the weaker grocery market for its latest decline in UK like-for-like sales, although it said it still took £1billion in sales in the five days before Christmas, including its biggest ever trading day.
Unlike Morrisons, which has still to break into the online grocery market, Tesco said it generated £450million from internet shoppers over the six week Christmas period, up 14% on a year earlier.
Overall, Tesco said it remained on track to meet the City’s profit forecasts of between £3.1bn and £3.4bn for the year to April.
However, the disappointing sales update will increase the pressure on chief executive Philip Clarke’s £1 billion turnaround plan for the UK.
Tesco is scrapping more than 100 major UK store developments and focusing growth on convenience stores and its online offering, while also looking to transform stores into family-friendly retail destinations.
Mr Clarke said that with household incomes growing slower than inflation, families feel they have less to spend than they did last year and in previous years.
He added: “While families still treat themselves and parents always want to give their children a good Christmas, budgets remained constrained and optimism around the economy and house prices led to slightly more borrowing on credit cards.”
Morrisons said consumers had been managing their budgets very tightly and were shopping across a range of formats and retailers.
Itadmitted the Christmas period had been “very challenging”, with chief executive Dalton Philips adding: “In a very tough market our sales performance over Christmas was disappointing.”
Morrisons shares slumped 7% in early trading following the update which was described as “quite awful” by Clive Black, a retail analyst at Shore Capital Stockbrokers. Tesco shares were 2% lower following its Christmas update.