Is Tesco's growth grinding to a halt?

published 5 December 2008

It's rough in retail. Of non-food retail businesses, 1,087 have collapsed in the twelve months to the end of November, a 17% increase on last year, according to business researcher Experian. These include Woolworths and MFI, which "went into administration last week", said The Times' Rosie Murray-West. And Experian chief economist Matthew Sherwood sees "little relief in sight" for hard-pressed retailers, with the downturn far from over and shoppers thus pinching pennies in the year ahead.

So every little bit of good news helps. Yet even Tesco, the world's third-largest retailer, could only ring up 2% like-for-like third-quarter sales growth, its weakest result since 1994. "Has Tesco gone off the boil?" asked The Guardian's Nils Pratley. Why are Sainsbury's, Asda and Morrisons "posting superior figures?" The fear is that Tesco's UK growth "may be grinding to a halt", said The Independent's James Thompson; its 30%-plus share of the grocery market "may be as good as it gets".

But Tesco argues that low sales growth is due to rampant price cutting to reflect commodity market deflation, said The Daily Telegraph's Damien Reece. Rivals have been slower to cut prices and are still seeing inflation in their sales figures. So "Tesco believes it's ahead of the curve a clever argument but one that will only be proved in the months ahead".