Tesco see group sales fall but UK and Irish sales rise

Tesco see group sales fall but UK and Irish sales rise

Tesco PLC (LON: TSCO) have seen their shares jump on Thursday morning after the firm gave shareholders an interesting update.

Tesco UK and Ireland saw its sales rise over the festive period, however total group sales fell following slumps in Central Europe.

The British supermarket is currently undergoing a review and restructuring program in Central Europe, and this may be the likely cause for the slip.

In Central Europe, the company is pursuing an “ongoing significant transformation”, which in turn, subdued sales. The company said it is simplifying its business in Poland. It is also making changes in the Czech Republic, Hungary and Slovakia, in a bid to improve its “relevance”.

Additionally, the FTSE 100 listed firm said that its banking unit had halted mortgage lending. Tesco Personal Finance PLC will cease new mortgage lending as it looks to sell on its mortgage portfolio.

Without the mortgage freeze, Tesco Bank saw a 0.1% growth in the third quarter, and 1.6% in the festive period.

In the six week period which ended on January 4, the UK & Republic of Ireland sales increased by 0.2% and rose 0.4% on a like-for-like basis, excluding fuel.

Total group sales fell by 1.7%, however, and by 0.8% on a like-for-like basis, however shareholders have not seem to phased.

In the third quarter, the firm saw its grocerty sales fall 0.9% compared to a year ago whilst total sales dropped 1.4%.

Across the Christmas period, total sales over the 19 weeks period were down 1.5% year on year to £21.03 billion.

Turning to Asia, the firm saw total sales be equal over the 19 weeks period at £1.93 billion, however sales fell 1.6% on a like for like bass.

The company said on Thursday: “No decisions concerning the future of Tesco Thailand or Malaysia have been taken, and there can be no assurance that any transaction will be concluded.”

Chief Executive Dave Lewis said: “In a subdued UK market we performed well, delivering our fifth consecutive Christmas of growth. In our Centenary year, our customer proposition was compelling, our product offering very competitive and thanks to the outstanding contribution of our colleagues, our operational performance was the best of the last six years. As a result, this Christmas we had the biggest ever day of UK food sales in our history.”

City analysts were a little more critical of the results and pointed to a situation in which Tesco were putting in a lot of work just to stay where they were.

“Tesco said they outperformed UK rivals with the biggest ever day of UK food sales in it’s history, but despite this, they still only managed to eak out a 0.1% rise in underlying sales in it’s home market during what it said was a “subdued” Christmas for consumer spending,” said John Woolfitt, Director of Trading at Atlantic Capital Markets.

He continued “this just goes to show that with all the hard work and price cutting, how hard an environment it is for the UK’s retailers.”

“With all Tescos efforts leading to a 0.4% rise in UK Christmas sales, shares are receiving a modest lift in this morning’s trading, shrugging off weakness elsewhere in the Tesco group.”

Slower trading for British Supermarkets

Only a few days ago, Morrisons (LON:MRW) reported that their sales have fallen in their update dating to January 5.

The firm said that challenging trading conditions coupled with consumer uncertainty were the largest contributors to the slump in sales.

Morrison’s said that said like-for-like sales, excluding fuel, were down 1.7% year-on-year.

Additionally the decline was further accelerated by a fall in retail sales, as a like for like performance in the wholesale unit remained flat.

Notably, fuel sales declined 2.8% year on year across the 22 weeks period, and total sales dipped 2.9% but the figure totaled 1.8% without fuel sale considerations.

The company said: “We managed costs well throughout the period, offsetting some of the impact on like-for-like sales of the challenging trading conditions and continued uncertainty amongst customers.”

Additionally, Sainsbury’s (LON:SBRY) have seen their shares dip as the firm reported a fall in quarterly sales, however shareholders got a pleasing result when the firm struck a deal with Coles (ASX:COL) in a wholesale agreement.

In the 15 weeks to January 4, total retail sales, excluding fuel, were down 0.7% from last year. Including fuel, sales were down 0.9%, which has seemed to edge shareholders.

Compared to 2018, on a like for like basis sales excluding fuel also were 0.7% lower year-on-year, but the like for like decline dropped further to 1.1% when including fuel sales.

Growth outside the big four

Kantar published data on January 7 which showed the rise of Lidl and Aldi in the British supermarket sector.

Aldi saw their market share rise to 7.8% during the period, as Lidl also grew to 5.9% from their previous 5.3% showing significant gain for the German firms.

A notable performance came from Ocado Group PLC (LON:OCDO) who showed the fastest sales rise along with the German firms.

Ocado saw a rise of 13% in year on year sales from £345 million to £389 million, as it increased its market share to 1.3% compared to the 1.2% figure last year.

Certainly the rise of German counterparts and the growth of smaller supermarkets has left Tesco and the other British supermarkets with ground to make up, and shareholders will be keen to see a response in the New Year.

Shares of Tesco trade at 256p (+1.99%). 9/1/20 10:37BST.