Life has not been good for supermarket giant Tesco.
Company spokesperson revealed that Britain’s largest supermarket chain had posted its worst quarter sales of the year. Losses were not isolated to just UK stores. Tesco reported that overseas markets fared badly too. The only profit was shown in their gasoline sales. Sales were forecast to drop 2% due to the declining European economy and they actually dropped nearly 3%.
Chief executive Philip Clarke, admitted: "Clearly Christmas was disappointing for us." All Tesco business did not show the same drop as their grocery department bricks-and-mortar branches. Besides petrol, Tesco also saw an increase in online and convenience stores.
Some have criticized Tesco’s move to cut out such less profitable areas as electrical goods. Others point to changes in customer buying habits. Critics say Tesco has failed to keep up with shifting client trends. One said Tesco was “the worst department store in the country.”
The latest casualty is the Tesco store in Glengomley, Belfast. The reason for the store closing which threw twenty-eight employees out of work was cited as competition from German discount stores, Lidl and Aldi. When analysts criticized Tesco’s 2.5% inflation on food, Clarke responded that Tesco was limiting price increases to below inflation. With the latest losses, Tesco shares fell almost 2%
Financial analysts are predicting that the supermarket giant will still show an annual profit of between £3.16bn and £3.42bn. Tesco financial director, Laurie McIlwee, admitted that Tesco’s optimistic outlook as a little too rosy given grocery performance weaknesses across the UK. Tesco invested over £1bn in a two-year plan to complete store renovations, add staff, broaden product lines, and cut prices so they are more competitive with discount chains.
Despite the less-than-hoped-for financial picture revamps, more staff, new product ranges and price cuts. Tesco’s chief executive, Philip Clarke, insists that the company is doing all the right things to respond to consumers’ changing shopping habits. “People are shopping more locally, shopping online more and shopping a little more often," he notes. Plans to deal with disappointing profits include a ten-year plan to decrease retail space in a hundred stores. The plan also involves wooing parallel businesses and children’s activity facilities to take up the space. Mike Dennis, an analyst at Cantor, noted that Tesco’s latest campaign to bolster sales which included price matching used by such retail giants as Wal-Mart seem not to have worked.