Tesco Reports Third Consecutive Quarter of Falling Sales

04 Jun 2014 --- Tesco has reported a decline in sales for the third consecutive quarter, due to increased competition from rival supermarkets. For the three months to 24 May, like-for-like UK sales (including VAT and excluding petrol) dropped by 3.7%.

Tesco has had to ramp up its competitive pricing strategy in order to better compete against the rising dominance of discount grocers, such as Aldi and Lidl. The grocery retailer recently lowered prices on essential items such as bread, milk and eggs. Tesco said volumes of these items had risen 28% in the quarter.

The retailer has also recently launched a programme of store upgrades, whereby 650 stores will be revamped over the next 12 months.

“We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers,” said chief executive Philip Clarke. “We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole.”

However, analysts believe the drop in sales at Tesco reflects a decline in overall expenditure which could be the result of an overall decline of 1 million customers per week who are now shopping elsewhere, according to reports.

The UK’s largest supermarket saw its share of the market drop to 29% during this three month period, compared to 30.5% a year earlier. Morrisons also saw its share of the market drop, from 11.6% to 10.9%.

In contrast, Aldi and Lidl, the German budget grocers, saw their market share rise to 4.7% (from 3.5%) and 3.6% (from 3%) respectively. At the premium end of the market, Waitrose has also seen sales increases.

Tesco’s international business also took a hit. Its overseas operations saw like-for-like sales decline by 2.2%, which included a 1% drop for its European arm and 3.2% for Asia.