Worsening sales expected from Tesco

Updated: 

PA

Britain's biggest supermarket Tesco is expected to post a third successive quarter of worsening sales when latest trading figures are published tomorrow.

The first quarter update is likely to pile further pressure on embattled chief executive Philip Clarke and comes as latest industry data shows a continuing squeeze on the retailer's market share.

Analysts' forecasts for the like-for-like sales decline for the period range from 3.5% to more than 4%. It follows drops of 1.4% and 2.9% in the previous periods.

Mr Clarke insisted earlier this year that he was staying put at the helm of the retailer despite unveiling a second year in a row of falling profits.

But City experts believe the latest disappointing trading figures will cast fresh doubt over the £1 billion turnaround plan he unveiled two years ago, with his plans including a £500 million "refresh" programme to upgrade stores.

Tesco and its "big four" rivals Asda, Sainsbury's and Morrisons are facing an increasing threat from discounters Aldi and Lidl, who are gnawing away at their market share.

Mr Clarke said earlier this year that the business would invest £200 million to cut the price of staples such as butter, milk and eggs.

Latest figures from Kantar Worldpanel showed Tesco's market share slipped to 29% in the 12 weeks to May 25, compared with 30.5% a year earlier. Sales over that period fell 3.1%, the industry data showed.

Analysts at Barclays expect like-for-like sales will have fallen 4.1% in the first quarter of the financial year, representing Tesco's weakest performance "for many years".

Experts at Shore Capital argue the pain at Tesco should be easing instead of getting worse, pointing out that the store upgrade programme is more than a year old and should be having a positive effect on sales.

They estimate Tesco will suffer a 3.5% like-for-like sales fall in the UK and added that the strategy "simply just does not seem to be working".

Cantor Fitzgerald analyst Mike Dennis expects a 3.7% slump. He said: "The UK market is polarising faster
between budget brands and premium ones. It seems Tesco is stuck in the middle and investors could be questioning management's strategy."

Tesco has more than 3,000 UK shops employing more than 300,000 people, with annual sales of £48.2 billion at home and £70.9 billion overall.

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