Global retail giant Tesco has outlined its result for the third quarter of the year, reporting on varied results both at home in the UK and overseas.
Overall sales for the thirteen weeks ended 24 November increased 2.4 per cent at constant exchange rates (1 per cent at actual rates), mainly driven by its Asian operation.
In the UK, however, the group saw like-for-like sales fall 0.6 per cent on the third quarter of 2011, although total sales grew by 1.7 per cent, driven by improved like-for-like food sales of 1.2 per cent.
'I am pleased with the performance of our food business in the UK,' said Philip Clarke, CEO at Tesco. 'Our six-part plan is about improving the shopping trip for customers for the long-term and this is a positive early sign. We’ve now refreshed nearly 300 stores, upgraded or introduced well over 3,000 products and added innovations such as Delivery Saver to our already successful online grocery business - and there is plenty more to come in 2013.
'Our general merchandise performance overall in the UK was not good enough, and we are renewing our efforts to deliver sustainable, profitable growth in this part of the business.'
Tesco reported that its international consumers had faced 'even more challenging' conditions in the third quarter, although Asian sales grew 6.8 per cent at constant exchange rates, boosted by a strong Thai performance.
Total sales in Europe excluding petrol climbed by 1.1 per cent at constant rates, although weak European currencies against the sterling impacted growth at actual exchange rates, as like-for-like sales dropped 3.6 per cent.
'We have seen a further weakening in consumer spending in Central Europe, although the effects of this have been partly offset by a better quarter in Asia,' Clarke added.
In the US, the group's like-for-like sales performance fell below 2 per cent, and the group has announced that it is conducting a strategic review of the business with 'all options under consideration' – Tesco has already revealed that Fresh & Easy CEO Tim Mason has left the company, with a withdrawl from the market widely anticipated.
In its report, the retailer said that its outlook for the year remained unchanged in the UK, while adding thatinternationally it expected third-quarter trends to continue through the
'I am looking forward to the important seasonal period ahead, and am confident in our plans to deliver further improvements in our shopping trip for customers,' Clarke added.
David Gray, research analyst at Planet Retail, said that Tesco's international results were expected, adding that the company's move to review it's US operation was predictable given its annoucement to restrict capital.
'It came as little surprise to us that Tesco’s international businesses continued to suffer, faced with serious headwinds across all regions from Europe to Asia and the US,' noted Gray. 'In Asia, sales were impacted by the continued effects of new legislation on shop opening hours in South Korea, while the chill from the eurozone crisis is hampering sales in Central Europe.
'In the US, plans to review the [Fresh & Easy] business are not entirely unexpected considering the company’s earlier announcement to restrict capital investment in the venture. We anticipate a potential exit may be on the cards,' he added.
Gray explained that Tesco had long-term expansion opportunities in Asia, with Thailand the stand-out performer.
'In the UK, trading was hit by subdued non-food sales, which continue to have a dampening effect on the company's like-for-like figures,' he continued. 'However, the UK investment programme is ticking along nicely, with improvements to product ranges and store refurbishments making an impact. Nevertheless, while Tesco remains on track to refurbish 430 stores by the end of fiscal 2012, this will only scratch the surface with more than 3,000 shops in the UK, many of which are tired and in need of a refit.
'We also stick to our previous guidance that we don’t anticipate any new market entries (barring potential additional F&F franchise stores) in the short term as Tesco addresses problems both at home and abroad.'
