Tesco Asia sales growth stalls

Tesco Asia’s sales growth stalled in the third quarter as Thais stopped spending during the mourning period for their late king.

First quarter growth was 3.3 per cent and second quarter growth 3 per cent. But during the third quarter, according to results released it shrank to an underwhelming 0.4 per cent.

Tesco CEO David Lewis said the slowdown reflected “a particularly strong step up in the comparative” period. “Our sales performance in Asia also reflects some weakening in consumer spending in Thailand during the Christmas period. We are proud that our colleagues have continued to serve our customers so well during such a sad time for the nation, following the death of King Bhumibol Adulyadej.”

International like-for-like sales grew 1.2 per cent reflecting a strong seasonal performance last year. While there was little sales growth in Thailand, Lewis says the company managed to expand its market share there during the quarter.

Globally, the UK-headquartered retailer continues to improve under Lewis’ stewardship with the company winning back market share and sales growth returning. UK like-for-like sales grew 1.8 per cent.

“We are very encouraged by the sustained strong progress that we are making across the group. In the UK, we saw our eighth consecutive quarter of volume growth and delivered a third successful Christmas.

Our fresh food ranges proved particularly popular, outperforming the market with great quality, innovative new products and even more affordable prices. Internationally, we have continued to focus on improving our offer for customers in challenging market conditions,” he said in a statement.

“We are well-placed against the plans we shared in October to become more competitive for customers, simpler for colleagues, and an even better partner for our suppliers, whilst creating long-term value for our shareholders.”

David Alexander, senior analyst with Verdict Retail, says Lewis’ pragmatic approach to steering the Tesco ship out of choppy waters looks more assured with each passing update.

‘The numbers from third quarter and Christmas trading are hardly spectacular, but they represent a further positive step in the steady progress the ex-Unilever boss has made since taking charge.”

Alexander says simplifying the offer has been at the heart of Tesco’s turnaround strategy.

“On a broader level, this has resulted in the dismantling of the Phil Clarke legacy; trimming the fat from Tesco’s balance sheet with the sales of Giraffe, Blinkbox, Euphorium and HomePlus. At its heart though, it is about delivering an improved experience for the people that can make the difference for Tesco: staff and customers. Poor product availability and customer service had been issues plaguing the troubled Tesco of old, so store ordering systems have been improved, stock is now replenished earlier on in the day and deliveries to large stores are now more likely to arrive on time. What’s more, this year Tesco recruited an extra 15,000 seasonal staff to assist over the Christmas period, up from 4000 last year, making for a smoother process for customers in-store.”

Alexander says while these changes are not revolutionary, they have been critical in reshaping Tesco.

“Time and again, Lewis has displayed an unflinching willingness to make the tough calls – witness the highly public standoff with Unilever over supplier pricing in the wake of the weaker pound and the recent announcement that 1000 staff are to be made redundant in its distribution network, again to “run its business more simply and in a way that best serves customers”.”

Although the numbers coming from both Tesco and rival Sainsbury’s are left in the shade by the festive performances of Aldi, Lidl and a resurgent Morrisons, both can take considerable heart from what appears to have been a very strong end to the year in grocery, believes Alexander.

“With tougher times predicted to be just around the corner, Tesco cannot afford to take its foot off the pedal.”

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