Tesco profit falls but turnaround ‘on track’

Rival Sainsbury’s, meanwhile, has reported a better than expected rise in sales driven by a strong performance of its own label lines and its Brand Match promotion.

Tesco reported 0.1% rise in UK like for like sales in the three months to 25 August following three consecutive quarters of falling sales. Half year like for likes fell 0.7 per cent.

The improvement was driven by “a more competitive offer” including a “stronger blend of price, promotions, coupons and Clubcard offers,” it says.

Profit, however, fell 12.4% in the UK to £1.1bn. The drop is attributed to a £1bn investment in the business to improve performance as set out by CEO Philip Clarke in April.

Clarke says that the six-point turnaround plan he introduced is “on track” but adds that there is “more to be done”.

Tesco says that Clubcard data firm Dunnhumby is “instrumental” to its efforts and says the increased use of Clubcard data to improve the business and offer more personalised promotions is “starting to deliver results”.

A new marketing campaign expected to set out Tesco’s brand positioning for “years to come” is being developed by recently appointed creative agency Wieden + Kennedy and will launch before the end of the year.

Tesco says that nearly 80 per cent of customers have bought its Everyday Value range since it was launched in April and it will continue to expand the range.

Clarke says: “We continue to act decisively to tackle challenges and seize opportunities across the Group. In April, I set out our plans to ‘Build a Better Tesco’ in the UK. We have been hard at work and I am encouraged by our customers’ initial responses to the changes we have made – but there is much more to be done.

“It is in serving the changing needs of customers, as Tesco has done over many years, that we will create more value for shareholders,” he adds.

Sainsbury’s reported a 1.9 per cent increase in sales at stores open for more than a year in the three months to 29 September. Like for like sales for the first half of the year increased 1.7 per cent.

Justing King says that a year after launch, Brand Match is boosting performance by “reinforcing the competitiveness of [Sainsbury’s] price position” which is seen by customers as the “simplest” price guarantee on the market.

His comments come as the supermarket is forced to change some of its advertising around Brand Match for making misleading claims.

Growth is also credited to Sainsbury’s investment in its own brand ranges, which King claims are growing at a faster rate than any of its rivals’ own label ranges.

King says: “We expect the challenging economic backdrop to persist, but by helping our customers to Live Well For Less through competitive pricing, targeted promotions, quality own label products, and outstanding customer service, we are positioned to perform well coming into the important Christmas period.”