Tesco sales slow amid consumer gloom

Tesco Plc, the biggest UK retailer, said first-quarter domestic sales growth slowed after higher household bills and inflation prompted shoppers to spend less.

Sales rose 3.5 percent at British stores open at least a year in the 13 weeks ended May 24 excluding gasoline, the Cheshunt, England-based company said yesterday.

Tesco shares rose the most in almost six years in April when the company said UK sales accelerated in the current fiscal year's first five weeks even as the country's worst housing slump since at least 1978 caused consumer confidence to slump. The national grocery market is expanding as shoppers spend more on fresh produce, Taylor Nelson Sofres Plc figures show.

A "big promotional push" by competing food retailers reduced the pace of growth later in the quarter, Nick Bubb, an analyst at Pali International in London, said in a research report before the figures were published. He estimated UK same-store sales growth at 3.5 percent excluding gasoline.

Total sales increased 14 percent in the quarter. Foreign revenue rose 14 percent excluding currency movements. When gasoline is included, UK revenue advanced 6.4 percent in same- store terms.

Lower prices

Tesco fell 7.7 pence, or 1.9 percent, to 401.9 pence in London trading on Monday. The shares have slid 16 percent in 2008. They have been hurt by concern about consumer spending in the United Kingdom, the source of three-quarters of sales, and the United States, where Tesco's first stores opened in November.

The grocer cut prices on more than 12,500 products in Britain in 2008's first three months to retain customers.

Consumer confidence dropped to the lowest in at least four years last month as house prices sagged and oil prices rose to records.

Tesco's business is "designed to cope" with downturns, Finance Director Andy Higginson said in April. The retailer cuts "hundreds of million of pounds" in costs each year, he said.

The company controls 31.1 percent of the UK grocery market, almost equal to the combined share of closest rivals Asda and J Sainsbury Plc, according to Taylor Nelson Sofres Plc figures.

The market expanded by 6.6 percent over the 12 weeks to May 18, Taylor Nelson has said.

Agencies

(China Daily 06/11/2008 page16)