Tesco sales back in decline but marketing lifting perception, claims CEO

Tesco sales slipped back into decline in its first quarter as the horsemeat scandal hit performance, but the supermarket claims marketing initiatives such as Price Promise and multichannel moves are helping improve customer perception.

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Tesco Price Promise

The supermarket reported a 1 per cent fall in sales from stores open for a year or more in the 13 weeks to May 25. The slowdown follows a 0.5 per cent rise in the fourth quarter and a 1.8 per cent uplift over Christmas.

Despite this, CEO Philip Clarke claims his “Building a Better Tesco in the UK” strategy is “on track” with customer perceptions improving across all key measures.

Price Promise, the coupon at till price comparison scheme that launched in March is “highly popular” with customers, he says, and has already improved perception of its ability to match or beat competitor prices.

Like for like sales in stores open for more than a year improved in all food categories, except chilled and frozen food following the horsemeat scandal on business performance. Sales in these categories has picked up in recent weeks, says Clarke.

Non-food sales continue to be a drag on Tesco’s performance but efforts to “refocus” its general merchandise ranges to higher-margin, higher-growth categories are said to be showing positive results. Tesco is preparing to relaunch a range of core general merchandise products in the coming months.

Online grocery remains Tesco’s fastest growing channel and it has strengthened its multichannel offering. Tesco now operates 169 drives through locations allowing customers to pick up their online orders at a convenient time.

Clarke says: “We have set out our plans to put customers back at the heart of the way we do business, and this is particularly evident in our recent initiatives on price and on food trust.  Customers across the UK are embracing Price Promise and we are encouraged by performance in our core fresh food categories and uplifts from refreshed stores.

“Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year.  Whilst we are not expecting economic conditions to improve in the near term, we have a customer-focused plan for the year in each of our markets which takes this into account, and we will maintain a disciplined approach to investment and cash flow as outlined in April.”

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