'Must do better' is the theme of Tesco's Christmas trading statement, as the UK's leading supermarket chain saw sales performance in its home market fall below expectations, prompting the company to advise full-year trading profit growth will be around the low end of the range of analysts' expectations.
Sales excluding fuel but including Value Added Tax (VAT) in the six weeks to January 7th were down 1.3% on a like-for-like (LFL) basis versus the previous year.
Tesco said its LFL sales performance was below its expectations, and it was not alone in this; broker Nomura Securities had forecast a fall of 1.0%.
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UK total sales including VAT and petrol grew by 3.8% year-on-year and by 1.7% excluding petrol. The UK government increased VAT at the beginning of 2011, thus artificially boosting retailers sales figures in comparison with the year before.
Across all of Tesco's divisions, both international and domestic, sales in the six weeks to January 7th increased by 5.2% including petrol (4.2% at actual exchange rates) and by 4.0% excluding petrol (2.9% at actual exchange rates).
However, excluding petrol sales, the group's crucial like-for-like sales figure, which restricts data to stores open for more than 12 months, was down 0.3%
The UK, where the group has underperformed for a while, is developing into a major bugbear.
Tesco says in general merchandise, clothing and electricals it saw growth overall with electronics, in particular, being helped by sales of tablet computers and e-readers.
Online sales growth in the UK grew at 14% with nearly one million orders placed at Tesco Direct during the period.
The international division makes a stark comparison to the performance of the UK business. It saw like-for-like sales grow 1.4% excluding petrol.
The closely watched US arm, Fresh & Easy, saw like-for-like sales growth of 19.3% over Christmas and New Year. The division is not expected to break-even for a while yet, but these numbers are clearly pointing in the right direction. Total sales in the US grew by 41%, giving some indication of Fresh & Easy's rate of expansion
In Asia total sales grew by 8.1% (7.0% at actual exchange rates), with what the firm describes as "modest" like-for-like sales growth of 1.2% affected by slower performance in Thailand, due to the recent flooding.
In Europe total sales grew by 7.0% but the weakening of European currencies against the pound saw that number reduced to 2% at actual exchange rates . Like-for-like sales growth was at 1.0% excluding petrol - stronger than the third quarter performance.
Total international sales over the period grew at 8.2% (5.0% at actual exchange rates).
In its guidance Tesco admits: "we have seen more strain than anticipated on our profitability during the important seasonal trading period."
The company says profits before tax for 2011/12 will be "broadly" in line with expectations but it anticipates "minimal group trading profit growth for the year".
BS
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