Tesco's sales tumble again despite price cut frenzy

Tesco unveiled another drop in like-for-like sales in Britain for the 13 weeks ending May 30.

Britain’s biggest grocer said like-for-like sales
“improved” during this period by falling by 1.3% “despite significant deflation and the impact of reduced couponing.”

Tesco marks this as a bit of a victory because it is an improvement on the same time last year when like for like sales fell 3.4% . However, look at this table — Tesco’s sales slump over the last year is pretty depressing.

Tesco is suffering because it is struggling to win the price war with German supermarkets Aldi and Lidl which are growing in popularity. According to the latest figures from research firm Kantar Worldpanel, Lidl’s market share hit a record high of 3.9%, for the 12 weeks ending May 24, up from 3.6%. This was thanks to an 8.8% growth in sales.

Similarly, Aldi’s sales rocketed by 15.7%, taking its share of the market to 5.4%. That’s up from 5% from the previous period.

However, while Tesco’s market share stands at 28.6% currently, this is a drop from 30.9% in 2012. This is especially worrying since Aldi and Lidl’s market share is growing so rapidly.

Furthermore, Tesco’s revenue is still struggling to expand.

In January, the group reduced the prices on more than 300 additional products across the quarter and reduced the price of a 15 lines of products by 20%. On top of that it froze the prices on more than 1,300 staple products in in the Republic of Ireland.

Tesco said it has “seen improvements in our pricing against all key competitors,” but judging by the sales trajectory, it has a long way to go to calm the nerves of investors.

“The improvements we are making are starting to have an effect. We are fixing the fundamentals of shopping to win back customers and relying less on short-term couponing. Customers are experiencing better service, better availability and lower, more stable prices and are buying more things, more often, at Tesco,” said Dave Lewis, CEO of Tesco in a statement.

“These improvements have come during the restructuring of our office and store management teams, which testifies to the focus, skill and commitment of colleagues across the business. We have also seen an improved performance in our international markets, as we continue to focus on serving customers better.”

“Whilst the market is still challenging and volatility is likely to remain a feature of short-term performance, these first quarter results represent another step in the right direction.”

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