Tesco Sales Hit by Food and Petrol Prices
Tesco has blamed falling food prices and higher petrol prices for posting their weakest underlying sales in over 5 years. According to the supermarket chain, sales for the group was nearly flat for the last 3 months.
Like-for-like sales for the UK only increased 1.1% during the 3 months to May 30 (excluding petrol). However, with the rise of VAT to 17.5%, which the company has urged the government not to raise, growth was only 0.1%.
Tesco also said that the 30% jump in fuel prices since last year means that shoppers have less to spend on other items. Tesco finance director Laurie McIlwee says that, along with lower food price inflation, which has affected their major supermarkets’ sales, shoppers are having to spend more on their fuel too.
Tesco anticipates their underlying sales in the UK to come to about 3% for this financial year. McIlwee said that they continue to see good growth in sales of their premium range. She also said that underlying non-food sales are still positive.
However, the anaemic underlying sales growth counts for 70% of the group’s trading profits. This is one of the challenges that Philip Clarke will face when he takes over as chief executive next March. Sir Terry Leahy announced last week that he will retire next March. Clarke is the grocer’s current head of international operations.
Tesco operates in 14 countries, and their overall sales grew by 8.2% during the 3-month period, which was boosted by strong performances in Ireland, Poland, South Korea and China. McIlwee said that this would be a great performance for many companies. At constant currency rates, total international sales rose 5.3%.