Tesco, Britain’s largest retailer and the third largest worldwide, had disappointing Christmas sales, reflecting a change in British consumer habits towards lower prices and convenience.
According to Tesco, falling sales were mainly due to a “weak grocery market.”
Three of the UK’s main retailers, William Morrisons Supermarkets Plc, Tesco Plc, and Marks & Spencer Group Plc all reported lower sales over the Christmas holiday period.
Tesco warned that its profits may be as much as £150 million ($246 million) lower. Profits for the group are expected to be between £3.16 billion and £3.42 billion ($5.2 billion and $5.63 billion).
Marks & Spencer started lowering prices well before Christmas in an attempt to lure consumers who had been intent on postponing their major shopping until some serious bargains emerged.
Consumers preferring multi-channel online offerings
According to retail analysts, this holiday season UK shoppers favored online channels more, especially those with a strong multi-channel offering, something Morrisons lacks and is now paying for dearly.
Cut price retailers such as Aldi and Lidl also cut into the large supermarket chains’ markets.
Tesco reported a same-store sales decline of 2.4% (not including gasoline/petrol and VAT) in the six-week period ending January 4th.
In an official communique, Morrisons said:
“The difficult market conditions were intensified for Morrisons by the accelerating importance of the online and convenience channels, where Morrisons is currently under-represented, and by targeted couponing which was particularly prevalent in the market this Christmas.”
“We continued to invest in the most compelling offer for the tens of millions of customers who chose to shop with us this Christmas, but further weakness in the grocery market as a whole continued to impact our performance in the UK.”
“Our ongoing work to Build a Better Tesco in the UK is also driving continued improvements for customers, although the effects are being masked in the short term by the strategic changes we have made to improve the long-term sustainability of our business – the transformation of our general merchandise business and the significant reduction in our new store opening programe.”
“As expected, this Christmas saw a further consumer shift towards multichannel retailing, and Tesco continues to play a leading role. The increasing focus we have placed in recent years on extending our lead in online grocery and on rolling out our Express format to over 1,600 stores in the UK alone has positioned us well to meet customers’ changing needs.”
“Our overseas performance has improved since the third quarter, driven by an improving trend in Europe. This is despite continuing external challenges, including the recent political disruption in Thailand.”