Tesco has cut its sales targets for the first time in years as it battens down the hatches and prepares the City and its shareholders for what it sees as a difficult period ahead.
The UK’s number one supermarket chain, already under fire for its negotiating tactics with suppliers, has now admitted to budgeting for two per cent underlying sales growth in the UK rather than the expected three to four per cent.
Tesco revealed its internal target to investment banking group Shore Capital, whose analyst Clive Black has been quoted as saying the move is "very significant" and explains why Tesco has been toughening supplier terms in recent years.
Black said: "Tesco has been budgeting for its business to do three to four per cent like-for-likes (same store sales] in the UK for many years, certainly for most of this decade.
"I can't remember the last time the budget was less than that.
"It is not about the profit forecast, it is about them saying they expect the UK economy to be materially slower. That cascades through the business. They are setting themselves to run off a lower cost base."
Tesco has changed its payment terms for angry non-food suppliers from 30 to 60 days and this will give it additional working capital in the run-up to Christmas.
Tesco chief executive Terry Leahy blames "powerful economic headwinds" despite reporting an 11.3 per cent rise in pre-tax profits in the six months to August 23.
